AOL Time Warner: A Merger Gone Wrong

AOL shareholders received one share of AOL TW for each AOL share owned and TW shareholders received 1.5 shares of AOL TW for each TW share they owned. While AOL shareholders owned 55% of the new company, the remaining was held by TW. The merger was soon being talked of as the beginning of a new trend: the coming together of traditional and new media companies. According to a report, AOL was 'a turbo-charged engine' that would bring old media giant, TW, into the Internet century. The merger was expected to result in a 30% increase in profits, amounting to over US $ 40 billion in revenues in the first year itself. The new company had 100 million paid subscribers, which included the customers of AOL's dial-up service and subscribers of TW's cable and magazine divisions...

Richard Bessler (Bessler), Head of Investments, AOL TW was the first top-executive to leave the company (he had reportedly taken an active part in the negotiations for the merger). Bessler resigned in March 2001; the reasons for his resignation were not stated. The cultural difference between AOL and TW was regarded as the major reason for Bessler's departure. Though both TW and AOL were assumed to have the skills necessary for assimilating and nurturing employees from different companies (since they both had a history of acquisitions), the reality was rather different. As AOL's Kenneth Novack replaced Bessler on an interim basis, analysts felt that Bessler's resignation was a 'symbol of a powershift' from TW to AOL. The next casualty of the merger was Turner...