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Was America On Line AOL and Time Warner a match made in heaven or not Many think not And if AOL had been forthright about its subsidiary AOL Europe perhaps the terms of the merger would have never happened or been altered It is too late to speculate now Although AOL made a poor decision in the months prior to the merger they have paid a price for that decision However with Time Warner in the picture they may have found a way to ease the pain at this point The history of the merger between AOL and Time Warner will show you what prompted the Securities and Exchange Commission SEC and Justice Department probes which prompted AOL - Time Warners strategy to alleviate stockholder concerns In October 2000 with the AOL -Time Warner deal due to close in just three months the European Commission EC ruled that its pending acquisition of Time Warner Inc could damage competition in Europes media markets The EC was concerned that AOL was a 50-50 partner with German media giant Bertelsmann in one of Europes biggest Internet service providers AOL Europe so the EC was ordering Bertelsmann to relinquish its control of AOL Europe Dwyer et al 2004 AOL was unwilling to own more than 50 of the venture since that could trigger a US accounting rule that would force AOL to merge all of the units losses on its books at a time when AOL was already facing weakening ad revenues and a declining stock price Therefore Goldman Sachs Group Inc agreed to purchase one percent from Bertelsmann and from AOL of AOL Europe for 215 million with the promise from AOL Europe that it could sell its portion back by a certain date at a set price This solution seemed to take the pressure off of not only Bertelsmann but also AOL Dwyer et al 2004 Unfortunately this agreement has come back to haunt Time
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