Question 1: Why is Radio One making the acquisition? What are the risks?
Radio One is the largest broadcasting company targeting African American audiences in the UnitedStates. It is the seventh largest radio broadcasting company in the country. The main strategy of Radio One is to expand within its existing markets and into new markets that have a significantAfrican-American presence. Separation of 12 urban stations from Clear Channel Communications is an opportunity for Radio One.
Indeed this acquisition allows Radio One to obtain a bigger African Americanbase, It would draw more African-American listeners than any other radio broadcaster and cover more African-American households than any other media vehicle targeting the audience. Moreover thisacquisition will increase the size of the company and it would bring greater advertising revenue since in the past the company had been successful in bringing more advertisers by convincing them about thespending power of African American community. At last it would give Radio One an opportunity to take advantage of acquiring stations in the top markets and thereby able to get a nationwide minoritymonopoly advantage and leveraging the fast population and the income growth among the minority which is Radio One’s primary target market.
Even if there are many benefits, we should not forget the risks.In fact sometimes acquisitions result in a net loss of value because of problems that arise in the combining of forces whether through technological incompatibility, unnecessary employees or equipment,poor management, etc. This often results in confusion among new management in the decision making of which staff to keep and which operations to uphold. A second risk involved with acquisition ismonopoly concerns. The United States Department of Justice, and the US Federal Trade Commission have the power to deny an acquisition in anti-trust cases that signal a monopoly or a negative impact on...