Question

Why was the AOL/Time Warner merger a good idea?

What was the single biggest flaw in the AOL/Time Warner transaction?

Was this transaction doomed to fail?

Answer 1

Time Warner anxiously had failed in establishing an online presence and hence, the idea of merger with AOL was compelling. It would have a footprint of millions of new subscribers through AOL which was slated to benefit from access to Time Warner’s cable network and content.

However, proper due diligence on the cultural aspect was not done thoroughly which eventually led to the failue of the merger. Synergies failed to materialize and they couldn't work well together with the Time Warner people's corporate culture not gelling with the IT based casual culture of AOL's employees.

The transaction was doomed to fail after the dot com bubble burst and the economy gradually slid towards recession. The loss of subscription revenue by AOL rapidly accelerated the eventual failure of the merger between the two companies.