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Is Amazon/Whole Foods This Cycle’s AOL/Time Warner – A Sign That The Party’s Over?

Towards the end of the 1990’s tech stock bubble, “new media” – i.e., the Internet — was ascendant and old media like magazines, newspapers and broadcast TV were yesterday’s news. This was reflected in relative stock valuations, which gave Internet pioneer AOL the ability to buy venerable media giant Time Warner for what looked (accurately in retrospect) like an insane amount of money.

Now fast forward to 2017. Online retailing is crushing bricks-and-mortar, giving Amazon all the high-powered stock it needs to do whatever it wants. And what does it want? Apparently to run grocery stores and pharmacies via the acquisition of Whole Foods, the iconic upscale-healthy food chain.

The two deals’ similarities are striking, but before considering them here’s a quick AOL/Time Warner post-mortem:

(Fortune) – The landscape of mergers and acquisitions is littered with business flops, some catastrophic, highly visible disasters that were often hugely hyped before their eventual doom. Today marks the 15th anniversary of one such calamity when media giants AOL and Time Warner combined their businesses in what is usually described as the worst merger of all time. But what happened then will happen again, and ironically for the exact same reasons.A lot of people thought that the merger was a brilliant move and worried that their own companies would be left behind. At the time, the dot-coms could do no wrong, and AOL (AOL) was at the head of the pack as the ‘dominant’ player. Its sky-high stock market valuation, bid up by investors looking for a windfall, made the young company more valuable in market cap terms than many blue chips. Then...


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