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AOL Time Warner Merger - M&A Strategy

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?

Note: Summarize in a minimum of 500 words for this assignment. Please include reference(s).

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

The merger of AOL/Time Werner occurred in 2000, creating a new company called AOL Time Warner. The CEO was Steve Case as chairman. AOL purchased Time Warner for US$164bn (http://rider.wharton.upenn.edu/~faulhabe/NETWORK%20EFFECTS%20AND%20MERGER%20ANALYSIS.pdf). It was approved by both the Federal Trade Commission and the European Commission (http://news.bbc.co.uk/2/hi/business/967049.stm), with restrictions to avoid dominance by AOL in the Internet music business. The shareholders of AOL owned 55% of the new company while Time Warner shareholders owned only 45% (http://www.timewarner.com/corp/newsroom/pr/0,20812,667602,00.html).

Initially, the effect of the merger enabled AOL to strongly bolster its NPD market power by (i) giving it the means to disadvantage its competitors for a large fraction of cable broadband customers; and (ii) enhancing (greatly, the parties contend) its ability to preempt a competitor's killer app?through tighter integration of all parts of the vertical chain (http://rider.wharton.upenn.edu/~faulhabe/NETWORK%20EFFECTS%20AND%20MERGER%20ANALYSIS.pdf). When the AOL-Time Warner merger was announced in January 2000, the combined market capitalization was $280 billion. Market ...

Solution Summary

This solution discusses the value effects of the M&A strategy on your selected company (AOL /Time Warner). It also explores any unanticipated outcomes for the M&A, and how any positive issues could have been anticipated and reinforced. Supplemented with an analysis of the merger.

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