... believed to have enormous synergistic potential. Synergy can broadly be defined by as: 2 + 2 = 5 That is, the sum of the parts are greater than the whole. Synergies can come from a number of sources, which I explore in the next section. These include under exploited economies of scope and scale, synergies that arise from reduced internalised transaction costs, and financial synergies. I go on to discuss whether the motives of the merger were in fact to exploit synergies and what alternative motives their may have been. Then, in the final section I discuss, with reference to empirical evidence and the view of management and commentators alike, whether AOL Time Warner's merger has failed. 3. WHY DIDTHEY THINK THEY COULD GAIN SYNERGIES? Reasons for merger The Economist (US), (Oct 26, 2002) "A steal? AOL Time Warner", Economist Newspaper Ltd. v365 i8296 pNA It is clearly evident from AOL ...

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