Contemporary Issues Paper Week Five

Contemporary Issues Paper Week Five - Contemporary Issues 1...

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Contemporary Issues Contemporary Issues Paper ADVANCED TOPICS IN FINANCIAL MANAGEMENT FIN/404 University of Phoenix March 16, 2009 Introduction The business world today is in a state of constant change. In this sea of change business managers are always looking for ways to turn a better profit. The way that this is 1
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Contemporary Issues best done is to gain a strong competitive advantage over the other companies in the market. One way that finance managers can accomplish this is to merge with another existing company. This can often create or maintain a competitive advantage in a relatively quick manner. The firms were already highly successful at the time and the vertical merger of the two firms was intended to become a media entertainment powerhouse. The AOL-Time Warner merger was the largest merger to date at the time and was intended to drive revenues in a huge way by combining entertainment and internet on a scale that was heretofore nearly unprecedented. America Online-Time Warner Merger The America Online-Time Warner merger was known as the second biggest merger of all time, up until the year 2000. This was considered the fantasy of total control, dream domination, that had allowed the world’s largest ever merger, the coming- together of Time Warner, with its world news from CNN, it’s 5,700 films, its Time publishing empire, and 120 million magazine readers, its TV show such as Friends and ER and its cable channels: and America Online, the world’s biggest Internet provider, with over 23 paid subscribers (Marr, 2000, ¶1). This type of merger is known as a vertical merger. A vertical merger is defined as two companies that produce different but complimentary products (Tatum, 2008, ¶1). Although AOL and Time Warner were already both successful companies, they voluntarily joined together so that they would be able to dominate a different part of the market. If they did not merge, neither company would be able to pursue the business venture on their own. “This strategic combination accelerates the digital transformation of Time Warner by giving our creative and content 2
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Contemporary Issues businesses the wildest possible canvas,” says Gerald M. Levin, Time Warner’s chairman and CEO, who will become CEO of the combined entity (Time Warner & AOL in Mega Merger, 2000, ¶1). The companies’ strategy of this vertical merger was to create a strong company that would offer new and innovative ideas, as well as services that other
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This note was uploaded on 08/17/2011 for the course BUS 200 taught by Professor Torres during the Spring '11 term at University of Phoenix.

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Contemporary Issues Paper Week Five - Contemporary Issues 1...

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