Corporate Valuation & Restructuring Assignment 1 America Online Inc. Indian Institute of Management — Lucknow Noida Campus, Noida, India - 201307 Submitted to: Prof. S C Bansal TIM Lucknow (Noida Campus) Submitted by: Rahulselvan T (PGPSM04021)1. Would you like to buy the shares of AOL? The company issued shares even if price per share came down from $72 to $58.37 Yes, I would like to buy the shares of AOL, and the reasons are, The Primary revenue mode for the AOL were membership fees, It was offering attractive rate structure of $ 9.95 as monthly fee which included five hours each month plus an addition hour was 2.95 compared to its competitors The attractive rate structure helped AOL to attract and retain their c AOL had offered a bundle of services to their wide range of customer base AOL Business strategy focused on creating new business opportunities and products for their customers through innovation. Formed a strategic all act as powerful intermediary between a large subscriber base and high quality content providers, it had significant bargaining power with both parties, increasing its profitability. AOL through its cost strategy, it drove down the price of doing business, captured 50% of home use of the internet AOL aggressive marketing produced great results AOL had a strong technology strength © Interface © Usability © Depth of services 0 Network © Rich functionality © Strong Supplier support tomer base ance with retailers and technology providers, AOL was able to 2. Current price per share is $81.63 (8th Nov, 1995). What is the correct price per share in your opinion? AOL stock prices were overvalued and the industry has projected growth of 30% in 1995 which is further expected to grow, companies like AOL where there is lot of uncertainty with their subscribers, the consistency of earning growth in the future years is just a bubble. The valuation of AOL is done as a standalone, internet portal firm. The valuation did not consider the recent mergers and takeavers done by AOL, if AOL Paid too much for these acquisition then the AOL would be in trouble. And the value of AOL's brand and ability to attract and retain subscribers are crucial.