Share
Explore BrainMass

AOL -- Time Warner merger

Was the AOL -- Time Warner merger a) one of the great mergers between media companies in recent history? b) a disastrous merger for Time Warner shareholders? or c) none of the above? Explain your reasoning.

Why might a public company consider a leveraged buyout (LBO)? What is the role of mezzanine financing in an LBO?

Following announcement of an acquisition, what are some techniques for enlisting support of factions which were opposed to the acquisition? This might include shareholder groups at the acquiring company or company being acquired, community groups, target company management factions, institutional investors, etc. If possible, cite examples of difficult take-overs you may be familiar with.

Debt is the lowest cost of long term financing by a wide margin when compared to cost of equity capital. Try to estimate Lester Electronics cost of debt and cost of equity. Generally speaking, why would a company who can raise sufficient debt capital to finance growth not be 100% debt, zero % equity in its capital structure in order to minimize its cost of capital?

Solution Preview

The response addresses the queries posted in 674 Words, APA References

Finance

1.

(a) Yes, the AOL - Time Warner merger is the one of the greatest mergers between media companies in recent history because it was the first prominent merger that makes unique type of business, which was great combination of the content i.e. music, news, programs and context i.e. internet access, so that people around the world may watch TV on their personal computer or approach the net from their television set (Percy, 2002).

(b) Yes, it is also a disastrous merger for Time Warner Shareholders because Time Warner net income has cut down from $3.3 billion (2007) to $2.6billion (2008) as compared to the last year i.e. about 28% and on the other hand, total revenues increased to 2%, which ultimately reduced the shareholders dividend. Thus, it is disastrous merger for shareholders.

2.

Public company considers a Leveraged Buyout (LBO) in order to increase wealth rapidly in a short span of time and mainly it is an acquisition of a company, in which the acquisition is considerably credited through debt. The following reasons might assist the public company to look at a leveraged buyout (LBO) like tax ...

Solution Summary

The response addresses the queries posted in 674 Words, APA References

$2.19