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Aol and Timewarner-A Case of Failed Merger

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Venkatesh Natarajan

The document summarizes the merger between AOL and Time Warner that took place in 2000. Some key points: - Time Warner was a large media and entertainment conglomerate formed from a 1990 merger. AOL was one of the largest internet service providers, founded in 1989. - The merger aimed to combine AOL's online presence with Time Warner's media content. However, it occurred just as the dot-com bubble was bursting. - Cultural differences between the companies, a lack of leadership integration, and failure to execute strategic plans led to issues implementing the merger successfully. The $350 billion merger ultimately failed to create expected synergies.

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Aol and Timewarner-A Case of Failed Merger

Uploaded by

Venkatesh Natarajan
43 views7 pages
The document summarizes the merger between AOL and Time Warner that took place in 2000. Some key points: - Time Warner was a large media and entertainment conglomerate formed from a 1990 merger. AOL was one of the largest internet service providers, founded in 1989. - The merger aimed to combine AOL's online presence with Time Warner's media content. However, it occurred just as the dot-com bubble was bursting. - Cultural differences between the companies, a lack of leadership integration, and failure to execute strategic plans led to issues implementing the merger successfully. The $350 billion merger ultimately failed to create expected synergies.

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Times Warner

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The document summarizes the merger between AOL and Time Warner that took place in 2000. Some key points: - Time Warner was a large media and entertainment conglomerate formed from a 1990 merger. AOL was one of the largest internet service providers, founded in 1989. - The merger aimed to combine AOL's online presence with Time Warner's media content. However, it occurred just as the dot-com bubble was bursting. - Cultural differences between the companies, a lack of leadership integration, and failure to execute strategic plans led to issues implementing the merger successfully. The $350 billion merger ultimately failed to create expected synergies.

Copyright:

© All Rights Reserved
Download as PPTX, PDF, TXT or read online from Scribd
Download as pptx, pdf, or txt
43 views7 pages

Aol and Timewarner-A Case of Failed Merger

Uploaded by

Venkatesh Natarajan
The document summarizes the merger between AOL and Time Warner that took place in 2000. Some key points: - Time Warner was a large media and entertainment conglomerate formed from a 1990 merger. AOL was one of the largest internet service providers, founded in 1989. - The merger aimed to combine AOL's online presence with Time Warner's media content. However, it occurred just as the dot-com bubble was bursting. - Cultural differences between the companies, a lack of leadership integration, and failure to execute strategic plans led to issues implementing the merger successfully. The $350 billion merger ultimately failed to create expected synergies.

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© All Rights Reserved
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AOL and TimeWarner- A case of failed merger

Time Warner

•Time Warner was created in 1990, following a merger between Time Inc. and the original Warner
Communications

•Merger aimed at creating the largest media and entertainment conglomerate in the world.

•Time is a leading book and magazine publisher with extensive cable television holdings, and
Warner is a major producer of movies and records and has a large cable-television operation.

•Merger would create a new company, Time Warner Inc., with a stock market value of $15.2 billion 
•The merger involved no cash exchange. Each share of Warner Communications would be
exchanged for 0.465 share of Time

•The proposed company could create television programming, distribute it over its own cable system
and syndicate it around the world.

•In 1996, Times Warner was disinvesting with cash inflow from investing activities.
AMERICAN ONLINE AOL
 
Founded in 1989 in Dulles, Virginia by Mr. Stephen M. Case

One of the largest Internet-access subscription service companies in the United States

The company initially served only Apple Computer’s Macintosh and Apple II machines users,
expanding to include personal computers running Microsoft Corporation’s Windows OS in 1993.

AOL offers Internet users services that include e-mail, AOL Instant Messenger (AIM) software, AOL
Video, video search, news, sports, weather, stock quotes, and MapQuest.

AOL generated revenue

· By running one of the largest Internet subscription services

· By providing broadband services to millions of customers around the world.

· From its one of the biggest and most successful advertising programs.
Advantages of Merger
• Online Presence of AOL ensured an entrance for Times warner in the online media.
• AOL’s user friendly interface
• Synergy of AOL and Times Warner forms the best content engine in the media industry.
• Combined audience of both the media house provides the largest consumption for any media in the
industry.
• Existing infrastructure provides an operating leverage.
• Both the companies are market leaders in online and offline platform, which when combined will be a
monopoly in the market.
Details of the merger
• It was a merger, but since AOL had higher equity value due to its skyrocketing Stock
price was acquiring Time Warner.
• AOL would own 55% of the new merged company and Time Warner 45%, the board
of directors would have an equal number of people from both AOL and Time Warner.
• Merger was announced on Jan 10th 2000, Market Capitalization of AOL was $164
Billion and of Time Warner was $97 Billion.
• Value of the combined company was $361 billion ($110/share assigned to Time
warner
• AOL agreed to issues $190 Billion in stock to acquire Time Warner
• Shareholders of Time Warner will get 1.5 shares in the new entity for 1 share that
they held in time warner
• The ratio agreed upon on the merger was 1.5:1
REASONS FOR FAILURE OF MERGER

• One of the major reasons for failure was the DOT COM BUBBLE BURST that happened right after
the merger.
• Huge cultural differences that proved to be a pivotal cause.
• There was also a lack of proper leadership.
• The management failed to execute their strategy after the merger.
• A lack of motivation was clearly visible in the organizational actions.

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