¶ … Warner and Comcast Merger
In the last several years, cable companies have been experiencing tremendous amounts of consolidation. This is because new competitors are entering the marketplace and they will often use bundling to sell a variety of services such as: telephone, Internet and HD TV. Comcast has been aggressively acquiring assets to improve their competitive position. (Standard and Poor's)
Recently, the proposed merger with Time Warner is supposed to enable them to consolidate market share and become more competitive. (Baker) To fully understand why Comcast has been taking this kind of approach, requires looking carefully at the deal itself. This will be accomplished by examining the firm's intentions and past transactions. Together, these elements will highlight the basic strategy Comcast is utilizing to adjust with changes inside the marketplace. (Standard and Poor's)
The authors of The Cure of the Mogul write: Mergers and acquisitions (M&A) do not create value. Is this the full story when it comes to Comcast's intentions?
Yes and no. There are times, when mergers and acquisitions do not create any kind of value. A good example of this can be seen with the AOL - Time Warner merger. At the time, this was considered to provide Time Warner with a large ISP (who had an enormous customer base). The problem is that both companies had completely different cultures and integrating them was very difficult. To make matters worse, AOL started losing customers to broadband and had no way of counteracting what was occurring. The result is that Time Warner sold them off for considerably less than they paid for it. (Standard and Poor's) (Knee) (Klein)
However, there are other situations, where these kinds of deals provide significant benefits to shareholders. This is because certain firms are offering the management with the flexibility to use new technology...
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