Stock Market and Paramount
Paramount Communications Inc.
Question 1 Paramount is a takeover target because other firms see synergy value associated with combining Paramount’s assets and operations with their own. Specifically, Paramount has several assets that complement other media companies. Value in the media is generated through several different channels. As a media company, Paramount has a presence in most of the entertainment sectors (see Exhibit 2). There seems to be a drive toward consolidation and several industry members are looking to diversify and round out their entertainment business portfolios. During this period Paramount was also experiencing increasing costs and continuous management turnover, which were starting to diminish financial performance. Viacom and QVC see this as an opportunity since they might be able to reduce certain costs through combined operations and improved distribution channels. Viacom and QVC, which are evaluating Paramount as an acquisition opportunity, see potential for further distribution of Paramount content (library, film, etc.) through channels such as cable networks. They also see opportunities to utilize Paramount’s film production competency as a potential growth opportunity.
Question 2 Both QVC and Viacom are interested in acquiring Paramount. Viacom is interested in Paramount because the two businesses are highly complementary and would create synergies. The combination would create opportunities for new businesses, reduce cost through economies of scale and removal of redundant functions, enhance distribution, and increase promotional potential. New business opportunities would be created by having a broader entertainment firm that can be present in more markets. Distribution and promotion of both Viacom and Paramount would be enhanced as each would be able to utilize the other’s content on their distribution channels. The company would be a comprehensive entertainment company that could compete in every entertainment sector.
Question 1 Paramount is a takeover target because other firms see synergy value associated with combining Paramount’s assets and operations with their own. Specifically, Paramount has several assets that complement other media companies. Value in the media is generated through several different channels. As a media company, Paramount has a presence in most of the entertainment sectors (see Exhibit 2). There seems to be a drive toward consolidation and several industry members are looking to diversify and round out their entertainment business portfolios. During this period Paramount was also experiencing increasing costs and continuous management turnover, which were starting to diminish financial performance. Viacom and QVC see this as an opportunity since they might be able to reduce certain costs through combined operations and improved distribution channels. Viacom and QVC, which are evaluating Paramount as an acquisition opportunity, see potential for further distribution of Paramount content (library, film, etc.) through channels such as cable networks. They also see opportunities to utilize Paramount’s film production competency as a potential growth opportunity.
Question 2 Both QVC and Viacom are interested in acquiring Paramount. Viacom is interested in Paramount because the two businesses are highly complementary and would create synergies. The combination would create opportunities for new businesses, reduce cost through economies of scale and removal of redundant functions, enhance distribution, and increase promotional potential. New business opportunities would be created by having a broader entertainment firm that can be present in more markets. Distribution and promotion of both Viacom and Paramount would be enhanced as each would be able to utilize the other’s content on their distribution channels. The company would be a comprehensive entertainment company that could compete in every entertainment sector.