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    AOL Time Warner Merger

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    Discuss the value effects of the M&A strategy on your selected company (AOL /Time Warner).

    Were there any un-anticipated outcomes for the M&A? How could any positive issues have been anticipated and reinforced?

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    Discuss the value effects of the M&A strategy on your selected company (AOL /Time Warner).

    After the merger of these two corporations, the merged entity, i.e., AOL Time Warner posted one of the biggest losses in history at that point of time after taking account of the sharp decline in the stock value that was used to finance the merger between these two companies in January 2001. This huge write-down was due to the new accounting rules regarding the valuation of goodwill, according to which a fall in the value of goodwill-the premium paid for an acquisition above the stated value of the assets obtained- has to be taken into account or recognized immediately and cannot be written off over a period of 40 years.

    reference: http://www.wsws.org/articles/2002/apr2002/aol-a29.shtml

    This change in accounting rule significantly declined the value of the merged entity, which was not expected at the time of the merger. The decline in value also reflected the emergence of recessionary trend in the high tech or internet industry at that point of time. Slow growth in subscriber rate, declining ad revenues, etc. resulted in significant ...

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    AOL Time Warner Merger: discuss value effect of the M&A strategy