Time Warner vs Comcast Essay

Excerpt from Essay :

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 and their customer base to enhance their dominance inside the sector. Comcast has been using this approach to increase their market share and supremacy inside specific segments since the mid 1990s. Some of the most successful acquisitions include: QVC, Media One, MGM, Susquehanna Communications, Adelphia and NBC Universal. Over the years, this has transformed the company from just another cable provider to a firm that controls a number of entertainment properties. This has increased its dominance and revenues from embracing this kind of strategy. In this case, mergers have been shown to create value for the acquired and parent companies. For Comcast, this strategy has enabled them to evolve with changes inside the marketplace. (Standard and Poor's)

As a result, the insights from Knee (2009) are not the full story when it comes to Comcast. This is because the authors are taking a subjective view when looking at why mergers did not work. In the past, the firm has traditionally focused on those areas that can help them to grow in the longer term. Sometimes, they will not be successful, from realizing key differences within the two organizations. The attempts to buy Disney are the classic example of this. As Comcast wanted to acquire the firm, yet the shareholders of Disney were opposed to it. Instead, of trying to integrate two organizations together in a hostile environment, the management simply walked away from the deal. (Knee)

This is illustrating how mergers must be utilized as an avenue for integrating two firms who can complement each other. In this case, one could argue that Comcast's intentions are based upon locating those assets that will enhance their competitive position. Anything that does not meet these standards will never be considered. (Knee) (Plunkett)

Comcast has a legacy of engaging large, game changing…

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