Question

In 2018, CBS Corporation submitted a below market bid to acquire Viacom. The rationale for the below market price bid stems from CBS’s due diligence of Viacom and numerous assumptions made by the Viacom management team about Viacom’s business prospects. In short, the CBS due diligence team discounted those statements made about Viacom’s business prospects by discounting the price offered. In addition to the perceived discounted price offered by CBS, there is a growing discord over who would run the combined CBS/Viacom entity. Shari Redstone of National Amusements is a majority shareholder in both CBS and Viacom. She has asked for CBS to acquire Viacom, but she believes that it is in the best interest of the new entity to be run by the current CBS CEO (Leslie Moonevs) and the number two position (COO and President) should be given to current Viacom CEO (Robert Bakish). However, CBS’s special advisory board believes that the current COO and President of CBS (Joe Ianniello) should have the number two position to ensure a smooth transition and continuity of operations. In response to the offer, Viacom’s advisory board has asked that CBS raise its bid by $2.8 billion. Company Backgrounds Viacom Inc . offers global media brands that create television programs, motion pictures, short-form content, applications, games, consumer products, social media experiences and other entertainment content. As of September 30, 2016, the Company offered its services for audiences in more than 180 countries. The Company operates through two segments: Media Networks and Filmed Entertainment. The Media Networks segment creates, acquires and distributes programming and other content for audiences The Media Networks segment provides entertainment content and related branded products for advertisers, content distributors and retailers. The Filmed Entertainment segment produces, finances, acquires and distributes motion pictures, television programming and other entertainment content under the Paramount Pictures, Paramount Vantage, Paramount Classics, Paramount Animation, Insurge Pictures, Nickelodeon Movies, MTV Films and Paramount Television brands. CBS Corporation is a mass media company. The Company operates through four segments: Entertainment, Cable Networks, Publishing, Local Media. The Entertainment segment comprises the CBS TV Network; CBS TV Studios; CBS Studios International and CBS TV Distribution; CBS Interactive; CBS Films; and the Company's digital streaming services, CBS All Access and CBSN. The Cable Networks segment comprises Showtime Networks, which operates its subscription program services, Showtime, The Movie Channel, and Flix. The Publishing segment comprises Simon & Schuster, which publishes and distributes consumer books under imprints such as Simon & Schuster, Pocket Books, Scribner and Gallery Books. The Local Media segment comprises CBS TV Stations, it owns 30 broadcast TV stations; and CBS Local Digital Media. Its businesses span the media and entertainment industries, including the CBS TV Network, cable networks and content production and distribution.

Given the information from contained in the question and your limited understanding of CBS and Viacom, discuss four problems that may occur as a result of this acquisition based on the information contained in the question

Answer 1

The four major problems which could arise in this acquisition are as follows:

1) The management of both companies needs to be merged successfully to ensure a seamless merger. Due to the fact, that both management may have different styles of functioning there could be some confusion on this.

2) Both companies have slightly different market segments and thus to integrate the operating segments under a single entity could be a challenge in a successful merger of both firms.

3) Another issue could be the combined brand positioning and messaging towards the customers. In case, there is some confusion in that respect, that could lead to market share erosion and dissatisfied customers.

4) The operating geographies of both companies are different and they need to redistribute the workforce in these areas by polling in resources from both the entities. This could lead to some friction as people in one geography may not be capable of handling markets of another geography and also adjusting to different culture may take some time.