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Mergers and acquisitions

Mergers and acquisitions - M&A Project M&A Project...

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M&A Project 1 M&A Project University of Phoenix October 27, 2008 Introduction Jason Search and Screening Process: Legal, Financial, and Operational Legal Concerns When a firm intends to pursue a merger, it is important to ensure that there will not be detrimental legal effects. The firm should ensure that there are not significant risks from legal concerns with industry specific legislation as well as anti-trust legislation that could make an
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M&A Project 2 attractive merger turn into a nightmare. The merger between, Internet giant, AOL and, media conglomerate, Time Warner was no exception. In order for these companies to merge, there were a significant number of legal hurdles that had to be overcome. First, the firms needed to get approval for the merger from the Federal Trade Commission (FTC); the FTC protects against unfair competition by barring activities that would create a monopoly. The FTC approved the merger conditionally. Many of these conditions limited the two firms’ abilities to gain much of the competitive advantage they wanted and it is one of the biggest reasons why this merger was a failure. Under the terms of the order, AOL-Time Warner would be required to open its cable system to competitor ISP’s. [It was] prohibited from interfering with content, passed along the bandwidth, contracted for by non-affiliated ISP’s and from interfering with the ability of non-affiliated providers of interactive TV services to interact with interactive signals, triggers or content that AOL-Time Warner agreed to carry. [In addition, it was] prevented from discriminating on the basis of affiliation in the transmission of content or from entering into exclusive arrangements with other cable companies with respect to ISP services or interactive TV services. [Finally, the merged company was] required to market and offer AOL's digital subscriber line (DSL) services to subscribers, in Time Warner cable areas where affiliated cable broadband service is available, in the same manner and at the same retail pricing as they do in those areas where affiliated cable broadband ISP service is not available (FTC, 2000). On top of that, because of the nature of the firms’ industries, they needed to get approval from the Federal Communications Commission (FCC). On February 11, 2000, America Online, Inc. (AOL) and Time Warner Inc. (Time
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M&A Project 3 Warner) filed joint applications under Sections 214 and 310(d) of the Communications Act, 47 U.S.C. §§ 214, 310(d), requesting Commission approval of the transfer of control to AOL Time Warner of licenses and authorizations controlled by AOL and by Time Warner or its affiliates or subsidiaries (FCC, 2000) The firm then had to wait almost a full year before getting approval to go forward with the merger in January of 2001. Hence, the time and expense of the legal aspects of a merger can be quite a problem if the firms are not prepared. In this case, the merger went forward but an understanding of these issues is vital for a successful merger. (459 words) Financial Concerns
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