The Worst Tech M&A Deal Ever

by menarate
Comments: 0

he deal concluded in 2000 between AOL and Time Warner Inc is considered the worst merger not only in the history of tech but also across the entire business world. $165 billion deal described as the “largest merger in American business history”. Two media giants were driven by the idea that the combined business would benefit from cooperation in technological infrastructure. The merger was proposed to give Time Warner the ability to digitise its content and grip a new online audience, AOL in return wanted access to Time Warner’s cable systems, and additional content to provide to its 27 million subscribers (40% of total US online subscribers). However in two years the merger resulted in a net loss of $99 billion, Time Warner Chief Jeff Bawkes described it as “the Biggest Mistake in Corporate History”, which ended with the separation of the two companies in 2009 substantially poorer than before the merger, and in 2015 Verizon bought AOL for $4.40 billion.

The reasons behind the failure are as follows: failure in the due diligence process of evaluating organisational compatibility as well as the lack of execution of the growth strategies. The management and cultural differences of both companies meant that they could never really merge and integrate. According to insiders, the cultures were too different. This worsened by an extremely unstable management structure.

The undeniable failure of the merger can be taken to prevent the importance of conducting proper due-diligence before engaging in business transactions, especially such expensive as the one between AOL and Time Warner. More scrutinous audit of the two companies may have revealed potential risks, which may have prevented the merger from taking place. What is more without clear strategic planning or execution, even the most strategically sound mergers can fail.

Comments 0

To leave your comment Login or Register