The Last Studio Standing: The Battle for Warner Bros. Discovery - A DCF Analysis of Paramount Skydance's Winning Bid

This three case suite uses the dramatic bidding war between Netflix and Paramount for Warner Bros. Discovery as a vehicle for comprehensive financial analysis of one of the most consequential M&A transactions in media history. Each case can be used stand alone or in combination.
- Case A examines the left hand side of the balance sheet: asset valuation. Drawing on a five act chronology of the bidding war and financial data from actual 10 K filings, students conduct a full DCF analysis of WBD. Key learning objectives include the drivers of free cash flow and firm value, the sensitivity of valuation to terminal value assumptions, the impact of investment needs on FCF, and best practices in financial modeling. A multiples based valuation provides a qualitative counterpoint for assessing the soundness of Paramount’s winning bid.
- Case B examines the right hand side: capital structure. The proposed merger would create one of the most leveraged companies in corporate history, making it an ideal vehicle for exploring financial leverage, its interaction with operating leverage, and the Modigliani–Miller theory of capital structure.
- Case C is a prequel to Cases A and B. It offers a detailed account of AT&T’s disastrous 2018 acquisition of Time Warner the episode that ultimately produced WBD’s financial distress and forced the sale analyzed in Case A. More qualitative in nature, Case C examines corporate strategy in the face of disruption, and the role of leadership and hubris in value destruction.

Discounted Cash Flow valuation; FCF calculation; M&A pricing; equity valuation; sensitivity analysis; continuation value; investment vs. FCF; Modigliani & Miller; capital structure theory; financial leverage; operating leverage; hubris; business model disruption.