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Mergers: Strategies and Financial Outcomes

In an effort to enhance my understanding of mergers and acquisitions I'm asking for assistance with the following:

Please identify 3 recent examples of mergers or acquisitions (whatever you would like) and:

1. Briefly analyze the strategies employed in the examples you identified.
2. Analyze the financial outcomes of the examples you identified.

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I need help will information and ideas to address these questions. Thank you.

Solution Preview

Let's look at three mergers: AOL and Time Warner, IBM-Rational Merger and Hyundai/DaimlerChrysler.

1. AOL AND TIME WARNER: FRAGILE PROMISES

In fact, the media refer to the merger as the deal of the century, because the scale of the deal is enormous.

Time Warner was eager to merge with AOL.. They faced many challenges as a merged company. (See article attached with the highlighted yellow portions for this question). The details of the AOL-Time Warner merger unfolded with a view to producing a media and comms company valued at about $350bn (£230bn). Vodafone courted Mannesmann with its ecommerce strategy, and others plan to launch ebusiness divisions and services which they may look to spin off in the future. (http://www.accountancyage.com/analysis/it/1107143). The agreed deal, the world's largest ever takeover worth $160bn in shares, brought waves of analyst euphoria and predictable hype. (see http://www.accountancyage.com/analysis/it/105209).

Since the merger there has been some add ons to the company, such as AOL purchased Netscape and FTC, which negotiated a five-year open access pact with AOL and Time Warner, the new company must let at least three other Internet service providers use Time Warner cable modem networks in any communities where AOL launches its own broadband service. (See http://pcworld.about.com/news/Jan112001id38041.htm for more detail).

Financially, the company is doing excellent. See pink highlight in article attached.
In fact the turnover among high-level executives is low (see http://www.ce.org/publications/vision/2001/mayjun/p24.asp?bc=dept&department_id=3 for details on why this is the case). Also see latest financial report below:

EXAMPLE: Contributed by Mike on Wednesday, March 17th, 2004 @ 08:53AM
from the no-surprise-there dept.

It must be that time of the quarter again. It seems like every quarter for the past couple of years, a rumor crops up that Time Warner is about to sell off AOL. Every time, Time Warner denies that this is going to happen, but each time the rumor comes up, it seems a little bit more likely - especially now that AOL is trying to convince itself that they're still growing. Maybe they can just merge AOL and Time Warner with Comcast and Disney. That ought to get people excited (http://www.techdirt.com/articles/20040317/0852249.shtml).

See another on-line article at URL: http://www.searchengineposition.com/info/Articles/historyofaol.asp

See the update on Warner and AOL below:

International Highlights: A Quarterly Overview of Key Developments at Time Warner and Its International Businesses
May 03, 2005

As a complement to Wednesday's (May 4) announcement of our company's quarterly financial results, we're pleased to present this edition of Time Warner International Highlights. Our goal with International Highlights is to keep you informed of the significant accomplishments of our international businesses and our progress in achieving our strategic goals. Online links to further information are included.

Time Warner Inc.

Time Warner Inc. and Comcast Corporation announced that they have reached definitive agreements to acquire substantially all the assets of Adelphia Communications Corporation for a total of $12.7 billion in cash and 16% of the common stock of Time Warner's cable subsidiary, Time Warner Cable Inc. Time Warner Cable and Comcast also will swap certain cable systems. In addition, Time Warner Cable will redeem Comcast's interests of 17.9% in Time Warner Cable and 4.7% in Time Warner Entertainment Company, L.P. (TWE) (together an effective 21% economic ownership of Time Warner Cable) in an efficient and mutually beneficial way. These transactions will serve to expand both companies' cable footprints and improve the geographic clusters of their subscribers. Importantly, consumers in areas now served by Adelphia will benefit significantly from the accelerated deployment of video, high-speed data, ...

Solution Summary

This solution identified and briefly analyzed the strategies used by three recent mergers, including AOL and Time Warner, IBM-Rational Merger and Hyundai/DaimlerChrysler. It also analyzed the financial outcomes. Supplemented with two highly informative articles.

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