Jerry Levin, known as the CEO who pushed for the ‘worst merger in corporate history,’ is less known for falling on his sword for the $350 billion deal later in life


Gerald M. “Jerry” Levin was more than just a self-proclaimed intellectual, a favorite with his friends as he called Camus around the Time Warner offices in Manhattan. He was also the “resident genius” who turned a fusty media company into a broadcasting pioneer.

After Levin died on March 13, however, obituaries remembered him for his key role in “the worst merger in corporate history”: The $350 billion AOL-Time Warner deal that served as a poster child for the dot-com boom. . The The Financial Times cast Levin as “builder of [a] the dangerous merger of the media of the dotcom era.” The Time of London advancedhe calls Levin “a notorious corporate Caligula” whose reputation was “totally discredited by his failure to coordinate.”

There is more to Levin’s story – until a few years later, he took over the role of leading the company in a deal that never came back. Levin also kept all of his AOL Time Warner stock, not issuing a single share until the day he died, according to a filing with analytics provider The Washington Service.

The 2000 merger between Internet developer AOL and entertainment giant Time Warner was risky for all involved. Originally heralded as a visionary deal, the $350 billion deal — still the largest in corporate American history — was rushed through, costing investors billions and many workers in their retirement savings. Levin never held another high-profile job.

Scorned by the media and scorned by many of his colleagues, Levin was ousted as CEO of AOL Time Warner just two years after the merger. From then until his death last week, Levin was often portrayed as short-sighted, self-centered, hypocritical, or all of the above – a leader who refused to listen to the good advice of his peers and should be held personally responsible for destroying the cause.

Decades later, Levin did the unexpected: He had his share of mistakes. In 2010, in an appearance on CNBC, Levin publicly apologized for the deal. “I am very sorry for the pain and suffering and death that you caused me. “I take responsibility,” Levin said. “It wasn’t the group. It wasn’t my friends at Time Warner. It wasn’t the bankers and the lawyers.”

Levin’s piece of the pie wasn’t the worst of his experiences — he’d experienced unimaginable misfortune earlier in his career.

Levin’s son, Jonathan, a public school teacher in the Bronx, was a bully he was murdered in his home by one of his former students in 1997. Levin hasn’t talked much about his son’s death, but later said it had a big impact on the world. In his book on integration, Fools Run, the past Chance journalist Nina Munk said that Levin’s loss made her “untouchable” and warned her friends not to criticize her actions too much.

“He wasn’t the same, obviously, after this horrific murder,” said Alec Klein, a Washington Post reporter who covered AOL Time Warner in the early 2000s and wrote a book about the merger. Chance.

“Digital DNA”

While Levin—who made a name for himself at Time Warner as the brains behind it HBO division-took the role of CEO of the company in 1992, the business world was at the height of the dot-com boom. By the late nineties, Time Warner’s legacy of cable and entertainment was outdated—everyone was talking about the potential of the Internet. AOL, then the nation’s largest Internet provider, was the undisputed juggernaut of the dot-com era. Under the leadership of young CEO Steve Case, it had a growing online market. Wall Street couldn’t get enough: AOL’s stock rose more than 717% from its 1992 IPO to its peak in 1997. Levin saw an opportunity.

He concluded that Time Warner had to take action to enter the growing Internet sector. AOL, the face of the new Internet and the hottest company on Wall Street, seemed like a good fit.

“[Jerry] “He felt like he had the right idea that Time Warner wasn’t moving fast enough into the digital age,” Ed Adler, former Director of Communications for Time Warner, said. Chance. “They always said they wanted to inject AOL’s digital DNA into Time Warner by doing this. Well, it didn’t help.”

A house builder

Levin and AOL The AOL case agreed to cooperate secretly, over dinner and a bottle of red wine in a Manhattan hotel room in November 1999. The fact that Levin kept his closest advisers in the dark has followed him ever since.

“The management of the company – of which I was one – and the people who were closest to Jerry knew nothing. [about the deal,]”Said Adler, who is a partner at the international firm FGS Global. “Very few people at Time Warner were happy about the merger.”

Much ink has been spilled over Levin’s actions. Maybe he was selfish—he was 61 years old at the time, nearing the end of his career, and maybe he thought of pulling off the biggest deal in American history as a part of his career rather than a good business decision. Maybe he was just stupid: it is clear that in 2000, at the height of the dot-com bubble, AOL’s stock was worth a lot, and Levin was probably giving more than he was earning. Maybe he thought he was doing the right thing.

Whatever his intentions, when Levin announced the deal to his Time Warner employees, the internal response was negative. Employees were worried that they would combine AOL’s high-tech, high-tech culture with Time Warner’s old business practices, and they didn’t see the point in making such a big deal because Time Warner was already burdened with debt.

“I think everyone involved in the deal had their doubts, but as we moved forward with the deal, we thought the pros outweighed the cons,” said Bob Pittman, former COO of AOL, who became the joint COO of the companies. wrote in an email to Chance. “It was a clash of cultures, and a merger of companies with great prospects and history.”

In large part, Levin’s refusal to heed the warnings of his neighbors is what shames him into being called the “builder” of the merger.

“I remember that a lot of people wanted it [Jerry] to get away from it, and he didn’t want to. He was a stubborn man. He wants to maintain his belief that this is going to change Time Warner,” Adler said.

Things started to go downhill as soon as the ink dried. AOL and Time Warner executives clashed. Reports surfaced that AOL relied on fish-counting techniques to keep its earnings, and hit the company with lawsuits. And the dot-com bubble began in March 2000, just weeks after the deal was made public, sending AOL Time Warner’s stock soaring.

In 2002, AOL Time Warner the report has lost about $100 billionat the time the largest annual loss in history, according to the 2003 Fortune 500 list. The company did not recover well after the merger.

“”[Looking back,] this happened at the wrong time,” Adler said.

The big picture

The company went bankrupt in 2002 and 2003, and the employees’ retirement savings – which were held mainly as corporate assets – were taken over. Levin retired, divorced his 32-year-old wife and moved to Los Angeles, taking a salary of $ 1 million a year as a “consultant” for the company and essentially leaving public life.

But while some Time Warner executives expressed concern about the deal, the public response after the announcement was encouraging, and supportive of Levin’s courage.

“It was hailed as a life-changing event — everyone went crazy for it,” Klein said. “There hasn’t been another merger since they took the initiative the way AOL-Time Warner did.”

A Chance a survey of Fortune 500 CEOs published in the February 7, 2000 issue of the magazine, just weeks after the merger was announced, reported that 71% of CEOs thought the merger was beneficial to Time Warner.

In the same story, Chance mentioned Morgan Stanley banker Jeffery Sine says that “he is absolutely convinced that new businesses are ‘opened up’ when you combine companies and get people to think creatively and collaboratively about what can be done… the thinking is that Jerry Levin, in particular, has the kind of intellect that is interested in the possibilities.”

One of the biggest skeptics at the time of the merger was Chance editor Carol Loomis, who published several articles questioning the valuation of AOL’s stock and the ideas he agreed with, but even Loomis did not step aside by calling the agreement wrong.

In an article published on February 7, 2000, Loomis and his colleague Christine Chen wrote: “Even at the speed of the Internet, it will take time for the world to realize whether AOL overpaid by offering 1.5 shares of its stock for each share of Time Warner, or whether Time Warner sold its impressive assets very cheaply, or if this is truly a marriage made in heaven.”

Levin made a very bad business decision. But while he may have been swimming against the tide in his C-suite, his views were in line with prevailing market beliefs. He looked at what was, at the time, conventional wisdom: the Internet was the Next Big Thing, and media companies like Time Warner couldn’t afford to miss out.

“He’s not to blame – and [I’m] I’m not sure it should be wrong,” Pittman wrote. “Everyone, including the Board of Directors and all the advisors, and the press corps at the time, has that responsibility.”

Stop selling

The merger is now widely recognized as the worst merger in American corporate history. Time Warner spun off AOL in 2009, and it was bought by AT&T in 2018.

Levin stayed out of the public eye after leaving AOL Time Warner in 2002. He began a relationship with former Hollywood writer and psychologist Laurie Pearlman. The two of them opened a health care center in 2004 Chance An article by Barney Gimbel called it “a sanctuary of calm and serenity in a world of chaos, stress and fear…the extensive 15-day program includes everything from social analysis to acupuncture, neurofeedback, and even sex therapy. It’s designed for filmmakers and viewers alike.” “Look like Levin.”

For his part, Pittman disagrees with the image of the worst combination in history.

“‘Worst merger in corporate history’ is… more than a little. It might be a good clickbait headline, but it doesn’t match the company’s performance in that the operating business generated more cash, generated new revenue and outperformed its peers during the period. sales are falling. the beginning of trouble. Bad press, big political fights, and strong opinions, yes. A very bad combination, no,” Pittman wrote.

Although he realized the deal was a mistake, Levin did not sell any of his AOL Time Warner assets. For better or worse, he stuck to his guns until the end.

Editor’s note: Information in this article is from Nina Munk’s “Fools Rush In: Steve Case, Jerry Levin, and the unmaking of AOL Time Warner.” Munk’s article is an excellent resource for readers interested in learning more about Levin and the AOL-Time Warner partnership.


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