Kate Brown may well have the best job in media. She jumped from the high-powered world of investment banking, where she helped to design and execute corporate media marriages such as the AOL Time Warner merger, to spearheading the merger and acquisition strategy for the world’s largest media company.
The $50 billion in free cash flow that AOL Time Warner officials say they will have available for deals over the next five years would make for quite a spending spree-if it weren’t for the fact the company has a healthy regard for building businesses organically from its vast internal resources.
“I wasn’t expecting as much of what I find really exciting here, which is lots of cross-divisional and other building from existing resources as an alternative to going out and buying something,” said Ms. Brown, who was managing director of media at Salomon Smith Barney before joining AOL Time Warner in October as VP of finance and acquisitions.
“This job isn’t just traditional M&A in terms of looking at acquisitions. There is a lot of internal business development across divisions,” she said.
Tuck and roll
AOL Time Warner has a market cap hovering around $200 billion, so it’s difficult to imagine the company needing to buy anything. But in its first year as a merged entity it has made a string of what Ms. Brown calls “tuck-in” acquisitions that expand some of its niche businesses, such as the company’s recent acquisition of Gaylord’s Christian music unit.
AOL Time Warner is expected to acquire the stake in AOL Time Warner Europe currently held by Bertelsmann A.G. It acquired leading U.K. magazine publisher IPC Group for $1.6 billion and expanded its stake to 49 percent in Viva Media, which owns Germany’s leading cable and satellite television music company. AOL Time Warner also recently announced plans to expand its strategic relationship with Sony Corp. to develop a range of open broadband initiatives, which some analysts say is another step toward an eventual merger of their interests.
Buy and expand
Ms. Brown would also be involved in many other intriguing potential deals in 2002, such as dismantling its long-troubled Time Warner Entertainment partnership with AT&T, regaining full control of key assets such as HBO and Warner Bros. AOL Time Warner also is in line to acquire Cablevisions Systems, which has cable systems in New York complementary to those owned by Time Warner.
Wall Street also expects AOL Time Warner to acquire television stations (perhaps Acme Communications, Paxson Communications, General Electric Co.’s NBC or Tribune Broadcasting) and buy more international companies to expand its influence abroad.
Ms. Brown is careful not to comment on Wall Street and industry speculation about what AOL Time Warner will buy next.
“Things don’t stay static. You’ve got the Hughes Electronics-EchoStar Communications satellite merger-and a lot of big players moving around Europe. Our strategy changes in response to what other people are doing and to changes in technology,” she said. “But I don’t think there is anything we have to do. I’m just juggling different ways of pursuing what we want to do.”
Ms. Brown’s marching orders are clear: to identify and execute “more complementary acquisitions” for AOL Time Warner’s U.S. operations, expand its international reach and help to shape financing and structure for new internally hatched businesses.
Having spent six years living in Europe in the mid-1990s, Ms. Brown has a special appreciation for the players and opportunities there.
AOL Time Warner Chairman Steve Case has said he expects as much as half the company’s revenues to be generated by business outside the United States within 10 years.
Ms. Brown and her core staff of 10 work with project teams from all areas of AOL on as many as a dozen deals at any one time. They screen hundreds of proposals that come in from strategic industry players, investment bankers and others.
Her jump to the other side of the negotiating table is proving interesting,with the move coming just weeks after the Sept. 11 terrorist attacks on the World Trade Center, which threw the country into a deeper advertising and economic recession that has slowed deal-making.
On the inside
“This certainly is an inflection point for so many businesses, financially and technologically speaking, in the U.S. and internationally,” Mr. Brown said. “Some companies are actually feeling more financial strain now. They need to shore up their balance sheets, and they need strategic help. So from an operations and financial perspective, we can help them more now. That presents even more of an opportunity for us,” she said.
AOL Time Warner officials, led by former Chief Financial Officer Mike Kelly, approached Ms. Brown about jumping to the corporate side of the ledger after the merger was consummated in January 2001. Ms. Brown represented AOL in the merger process while at Salomon Smith Barney and worked closely with Mr. Kelly on the details.
“The opportunity to work with senior management on the inside, to hear their thoughts in real-time and help carry out their plans, was an exciting prospect. When I made the move, the market was already changing and becoming more difficult for many other players. The opportunity to be with a company that has the capability of doing transactions in this environment is exciting.”
Even now, Ms. Brown, 36, is one of the most powerful women in media, cutting multibillion-dollar deals in what remains essentially a man’s world.
“I was lucky to have had a good mentor from the get-go, who was Nancy Peretsman [now managing director for Allen & Co.]. She was my first boss in investment banking at Salomon Bros. when I was right out of college in 1988,” Ms. Brown said.
Having it all
“After that, I always knew anything was possible. She [Ms. Peretsman] combines business savvy and investment banking skills but also has a lot of style and has a family. She gives the perception that she is able to combine it all, be herself and succeed,” she said.
Ms. Brown’s moment of truth came a year before the AOL Time Warner merger, when her investment-banking profile was boosted by her leadership role in a number of big media deals, including Comcast Corp.’s unsuccessful bid for MediaOne, which eventually was acquired by AT&T.
“Even if the deals don’t go through, you’re the one with the idea, making the presentations, leading the team, working with high-level media executives. I was getting recognition from the organization that I was driving business. So this was a natural progression for me,” she said.
But she’s finding that on either side of the negotiating table the rules are the same. “The key to making a deal is that it has to make strategic sense and the principals have to be willing,” she said. “All the financial engineering in the world isn’t going to get a deal done without that.”