Why do so many mergers fail? One way to answer that question is to examine the biggest wreck of them all: the deal that brought together AOL and Time Warner. When America Online announced that it was buying Time Warner for US$163 billion on January 10, 2000, the news made the front-page of every newspaper in North America. The biggest merger ever, it was, according to the media, “a fusion of guts and glory,” “a mega-marriage of earth and cyberspace,” and, yes, “the deal of the century.”
Now, four years later, the AOL Time Warner deal has turned into one of the greatest debacles in the history of corporate America. More than US$200 billion of shareholder value has vanished. Almost every executive involved in the deal has left the company, discredited and humiliated. Approximately 50 shareholder lawsuits are pending, and both the Securities and Exchange Commission and the Justice Department are investigating the company’s accounting practices.
“The disastrous merger of Time Warner and AOL epitomizes the culture of corporate America and Wall Street in the late 1990s,” writes Nina Munk in her new book, Fools Rush In: Steve Case, Jerry Levin and the Unmaking of AOL Time Warner. “It speaks to the speculative mania that gripped America at the end of the twentieth century, when, as long as a company’s stock price kept going up and up, a C.E.O. was all-powerful, like a king with divine right.”
Nina Munk, an award-winning business reporter and a contributing editor for Vanity Fair, has followed the AOL Time Warner fiasco from the beginning, in every detail. In her address to the Canadian Club, Munk will reveal how the AOL Time Warner merger, like so many other huge corporate deals, was undermined from the start by the greed, ambition, and moral posturing of the C.E.O.s behind it. To examine the AOL Time Warner deal closely is to recognize a sad truth: despite rules set by the SEC and other financial regulators, a company’s own shareholders often count for less than the C.E.O. with his single-minded quest for power and glory.