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Time Warner
Warner Brothers registered in 1923 in Hollywood
In 1989, Warner Brothers merged with the publishing house Time to Time Warner
. Time acquired Warner for about US$14 Billion Time Warner acquired Turner Broadcasting System in 1996 Could secure more than 20% of all expenses for print advertisement in 2000 in the US
America Online
AOL was founded in 1985 under the name Quantum Computer Systems. AOL was the first on-line service requiring the use of proprietary software. AOL also provided Internet access to the World Wide Web in addition to its proprietary content. In 1991 it changed it name to America Online Inc. Extremely rapid growth in the late 1990s.
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AOL did not have a strategy for the next generation of internet users who would require broadband access. For AOLs Board of Directors, the portfolio of brands created with the merger of the two companies would cover the full spectrum of media entertainment and information. AOL computer services technology and, over all, they assured that the new business would be benefited from huge operating synergies.
Contd
On September 12, 2006, Time Inc. announced that Time4 Media, a group of men's interest magazines In the summer of 2008, the Reader's Digest Association sold QSP to Time Warner subsidiary Time Inc. for $110 million. March 2009, Time Warner Cable was divested from the company in a spinout. On August 26, 2010, in Chile, Time Warner Company took the full control of Chilevisin, a channel owned by Chile's President Sebastin Piera.
Proposed Valuation
The hype surrounding the AOL and Time Warner merger was fueled by and in turn helped to refuel the growing internet bubble. A valuation of these two companies was complicated and unprecedented. Assumptions of a 25% supernormal growth rate and a 5% terminal period growth rate the valuation of the company was over $93 per share. The sensitivity tables attempts to answer some of these questions with technical analysis and try to judge their impact upon the share price of the newly formed firm A more realistic supernormal growth rate for the two companies would have judged their synergies to deliver 5-7% growth for the short term.
Proposed Synergies
When AOL and Time Warner announced their merger in 2000 they had a clear vision of their synergies. The merger will combine Time Warner's vast array of world-class media, entertainment and news brands and its technologically advanced broadband delivery systems with America Online's extensive Internet franchises, technology and infrastructure. By merging the world's leading Internet and media companies, AOL Time Warner will be uniquely positioned to speed the development of the interactive medium and the growth of all its businesses. AOL at that time was believed to have the necessary experience to help Time Warner transform their divisions to the digital channels.
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As most likely synergies of the merger the board of AOL regarded cost reductions and opportunities of growth Efficiency increases were seen in marketing across different platform and distribution systems, cost synergies were likely to arise due to shared business functions . From Time Warners view this strategic advantage emerged from multiple brands, vast array of content, extensive infrastructure and strong distribution capabilities and that therefore the value of AOL Time Warner combined will be higher than the value of the single companies. the Time Warner board thought that through the merger the international position of the brand would be strengthened as well as the benefit for consumers increased.
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They even lacked the ability to recognize new trends in the digital industry. The main trends AOL Time Warner missed was the importance of highly personalized web services. A final reason for the failure is the fact that AOL and Time Warner were not able to encourage a climate within the companies to initiate the synergies that were proposed.