Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

America Online - Time Warner Merger : Why it Failed

Abstract:
America Online (AOL) and Time Warner announced their merger on January 10th 2000 to create the world's first fully integrated media and communications company with a market capitalisation of $350 billion. While AOL would have access to the high-speed broadband cable network of Time Warner, Time Warner expected itself to be catapulted into the 'Internet big league' by virtue of the merger. The merger faced stiff resistance, largely from the consumer groups and its competitors, who wanted the combined firm to open up its cable networks and allow rival entertainment companies to stand on an equal footing. Even as the merger was finally allowed to proceed by the Federal Trade Commission on January 11th 2001, the market capitalisation was already sliding downwards with falling share prices due to investor confusion over the fate of the merger and the Internet bubble burst that saw Internet stocks plummeting.

Pedagogical Objectives:

• To discuss the reasons and events that led to the failure of the merger and the alternate strategies that could have been adopted.

Keywords : Mergers, Acquisitions, Alliances Case Study;America Online (AOL) - Time Warner; Mergers and acquisitions; Internet service provider; Federal Communication Commission; Clicks and mortar company; Traditional media business; Software industry; Federal Trade Commission; Proprietary networks; Common carriers; Integrated consumer space; Entertainment industry; Pathfinder network; e-commerce; Information technology