Case AOL&Time Warner M&A

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.He also liked the fact that Pittman said he did not want control of Time Warner.Levin takes seriously the social responsibility of heading the publishing empire founded by Henry Luce in 1923.He said he "would not surrender control of that journalistic heritage to anyone".Pittman understood this point, and said he only wanted to be chairman, in charge of policy and technology.As talks continued Levin became convinced there was a "fit between the companies".He said: "They have the same value system, blue-chip board, very consumer-brand orientated, very aggressive in building market position and they are both subscription-based companies."Those similarities convinced him AOL would make a perfect partner.Yet Pittman and his advisers were worried they were giving too much power to Levin, who is seen as a wily operator.Despite the fall in AOL's shares Levin said he was confident the deal would be completed this year (assuming there are no objections by regulators)."The volatility that occurs after the announcement of a transaction this size is quite understandable.I think we have a very strong conviction that the two companies can grow a lot faster together than either could individually," he said.CNN, the 24-hour television news network owned by Time Warner, is expected to play a central role in increasing AOL's subscriber base outside America.Analysts said CNN would be promoted to Internet users by AOL, and CNN would promote AOL's services during its programmes.Similar cross-promotion is expected between every AOL Time Warner unit.Yet some analysts doubt that the synergies will be as great as predicted.One said: "Time Warner is a company of battling fiefdoms.There is almost no communication between the different units and you will never get them to co-operate in marketing and advertising."By merging with AOL Levin has found an Internet strategy and may have got the best of the deal.One analyst said: "This deal is far better for Time Warner than it is for AOL.Levin immediately got a 70% appreciation of the stock.He gets an Internet strategy.And he keeps his title and power.AOL, on the other hand, is sacrificing much of its future growth.It did not have to buy Time Warner to gain access to its cable system or its content.It could have just formed an alliance."Ultimately the success of AOL Time Warner will depend on Bob Pittman and his ability to cross-promote the company's many brands and reduce its dependence on subscriptions.Some analysts believe the threat of new free Internet service providers (ISPs) was a big factor forcing AOL to merge."Unless they got better and richer content they could not keep their subscribers or their subscription fees.Free ISPs are growing much faster than anyone else.Within two to three years I think 50%-60% of all American users will be using a free service." Although AOL has introduced a free service in Britain it is committed to maintaining fees elsewhere.Those fees provided 69.5% of its $4.78 billion of revenues last year.Advertising, by comparison, contributed only 21%.lIdentify and explain the strategic reasons behind the merger between AOL and Time Warner, including the “fit” between the companies and potential synergies.llExplain the particular problems faced by AOL and Time Warner in creating a successful merger.llEvaluate other methods of development for AOL and use your answer to discuss whether or not this merger is the best option for the company.llWhat do you think the media/mass communications industry will look like in the future?l [ Pobierz całość w formacie PDF ]

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