Charter Communications: Another Bid for Time Warner Cable?
(6 pages of text)
Case (Pub Mat)
In the summer and fall of 2013, Charter Communications, the fourth-largest cable television company by market share, made multiple bids to acquire Time Warner Cable, the second-largest company, only to be rejected. Then, in late 2013, Time Warner Cable invited Comcast Corporation, the largest cable television company, to make a friendly bid. In February 2014, Time Warner Cable accepted Comcast Corporation’s bid. However, a year later, in April 2015, the U.S. Federal Communications Commission recommended hearings on the merger case, signalling that the agency was unlikely to approve the merger. Following that announcement, Comcast Corporation terminated its proposed merger agreement with Time Warner Cable on April 24, 2015, which meant that Time Warner Cable was again available for a merger. At that point, Charter Communications had to decide whether to launch a new bid for Time Warner Cable. If so, what should Charter Communications do differently in this new bid attempt?
This case is suitable for students in undergraduate capstone courses in strategic management and business policy, with a view on reinforcing the need to analyze strategic decisions such as mergers and acquisitions (M&A) from a richer and more nuanced perspective that includes not only the role of managements of the companies involved but also the role of interested industry players. It is best taught during the second half of the course semester, when corporate level strategies are being covered. This case is also useful in graduate business strategy courses discussing M&As, to broaden the analysis and to understand the role of multiple forces.
This case examines the influence from multiple sources on the Time Warner Cable (TWC) acquisition process, including the roles played by industry forces and groups such as competitors, new entrants, buyer groups, and regulatory agencies. M&As are an important strategic decision for small and large companies alike. An acquisition can substantially change a company’s business operations and organizational management. The events in the attempted TWC acquisition were driven by motivations from the companies involved (i.e., Charter, Comcast, and TWC). As well, industry groups actively sought, and succeeded, to obstruct the TWC acquisition by lobbying regulatory agencies, particularly against the Comcast bid. This case provides a fresh perspective on M&A analysis, which rarely explores the important role that industry groups play.
After completion of this case, students will be able to
- describe the competitive forces in the cable television industry to determine the competitive pressures on companies in that industry;
- using the valuable, rare, inimitable, and non-substitutable (VRIN) framework from the resource-based view, compare the three main players in TWC acquisition story;
- using theoretical concepts on M&As, analyze the motivations of Charter and Comcast for acquiring TWC;
- identify the economic gains and losses from the TWC acquisition to various industry groups, and analyze the events in the case to understand how industry groups can influence corporate strategy; and
- analyze bid prices offered by Comcast and Charter in the successive rounds of acquisition to identify some of the financial and non-financial factors that influence valuation.
Information, Media & Telecommunications
United States, Large, 2015
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