AOL Time Warner
The $350 billion merger that destroyed more shareholder value than any deal in history — and what it taught Wall Street about culture clashes.
In 1999, AOL's stock was inflated from dot com mania. Time Warner was old line media grounded in cable networks and content. The company's proposed a merger. AOL would acquire Time Warner for $165 billion. At the time, it was the largest merger in history. The market celebrated, not understanding what had happened. AOL didn't acquire Time Warner with cash. It acquired Time Warner with stock. AOL's inflated stock price meant the deal cost fewer actual earnings than it appeared. Time Warner shareholders got paid an overvalued paper, and AOL shareholders got real cable and content assets for inflated currency. The deal was valuation arbitrage, not strategic vision. The arbitrage broke apart within years.
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