Merger Of Youku & Tudou·A Strategic Battle

Online video has been one of the most competitive fields in China's internet industry for more than 10 years. In today's information age, China's online video sites have gone through almost the same path as other online video sites around the world did. In terms of innovation on online video business models, technologies, advertising creative, user experience, and so on, both Chinese and foreign online video sites have developed at similar paces. Still, there are many new ideas and areas to be explored.On March 12 th, 2012, Youku Inc.(NYSE: YOKU) and Tudou Inc.(NASDAQ: TUDO) announced that they would merge through a 100% stock-for-stock transaction. Upon the completion of the merger, Youku and its shareholders would own 71.5% of the new Youku Tudou Inc., and Tudou and its shareholders would own 28.5%. It was the first significant merger in China's fast growing online video industry. After the announcement of the merger, both Youku and Tudou's stock price rose up by 50%.In the 18 months after the merger, the new company started various integration measures to consolidate resources, reduce cost, etc. Through the 3-year effort, Youku Tudou Inc. has strongly maintained its top 3 position in China's online video industry, and also has moved fast into the mobile internet video frontier.During the process of combining Youku and Tudou, there are big gaps between the results and the expectations in many aspects such as valuation standards, market shares, integrating methods, etc. These differences reveal that in the new economic age, although some essential factors of traditional corporate mergers are still important, some new factors such as fast changing of external market situation, dependence on people, etc. could cause huge mismatch of the result and expectation. The consideration and analysis of these new factors provides multi-dimensional references to future corporate merger and acquisition.This thesis analyzes the dominant factors in merger and acquisition of new media companies by using the merger of Youku and Tudou as a study case. Through the analysis on industry ecosystem, business & resource valuation, corporate operation, etc., we try to layout the impacts of merger and acquisition on a company.