Fusion: AOL-TW

America Online - Time Warner was and is the largest merger in the American business history. It is, however, also believed to be the biggest mistake in the corporate history by Time Warner chief Jeff Bewkes. I have written the below article as part of the Strategist Club at MDI trying to identify the basic facts of the deal.

	AOL	TW
Products	online software suite called AOL, Internet service provider, AOL video, AOL local, AOL News, etc and other AOL security services	New Line Cinema, Time Inc., HBO, Turner Broadcasting System, TheWB.com, Warner Bros., Cartoon Network, Boomerang, CNN, DC Comics, Hanna-Barbera, Cartoon Network Studios and Castle Rock Entertainment.
Features	American global Internet services and media company headquartered at New York. At its prime, AOL's membership was over 30 million members worldwide.	One of the world's largest media companies, headquartered at New York city. Formerly two separate companies, Warner Communications, Inc. and Time Inc., (along with the assets of Turner Broadcasting System, Inc.) form the current Time Warner, with major operations in film, television and publishing.
Recent Happenings	The company’s revenue dropped 26% YoY in 2010 Q4.  AOL’s subscription revenues for the quarter also showed a 23% decline in subscribers YoY.It also acquired two companies in Q4 2010, Pictela and About.me, for an aggregate amount of $31.4 million.	In 2010 post spin off,Time Warner's Latin American division bought Chilean nationwide terrestrial television station Chilevisión. Time Warner already operates in the country with CNN Chile.
Why Deal	Time Warner would reach deep into the homes of tens of millions of new customers of AOL.	AOL would use Time Warner's high-speed cable lines to deliver to its subscribers Time Warner's branded magazines, books, music, and movies creating 130 million subscription relationships.

Valuation: AOL purchased Time Warner for US$164 billion. The terms of the deal called for AOL shareholders to own 55% of the new combined company.

Regulatory Approvals: Federal Trade Commission, Federal Communications Commission, and European Commission.

Outcome:The merger was not fruitful and the growth and profitability of the AOL division stalled due to advertising and subscriber slowdowns in part caused by the burst of the dot-com bubble and the economic recession after September 2001. The value of the America Online division dropped significantly. The total value of AOL stock went from $226 billion to about $20 billion. Its customer base also decreased to 10.1 million subscribers as of November 2007 and to 4.4 million by 2009.

Lack of synergies between AOL and the other Time Warner were also a cause of the demerger. Most Time Warner divisions were independent fiefs who were uncooperative in the merger deals.

In 2009, AOL announced that it wouldspin off Time Warner into a separate public companyending the eight year relationship between the two companies.