Mergers and acquisitions assignment report example


Every sphere of the corporate world has seen the integration through Merger and Acquisition. Merger and Acquisition (M&A) usually take place when two or more corporate entities join together their operations, either in part or full. The factors which play a large role behind such an activity include the relative size of the participating companies, their collective share in the market of operation, the ownership and control of individual partner after the combining of the business.

Merger and Acquisitions in Entertainment and Media Industry

As already mentioned before, Merger and Acquisition, are widely occurring phenomenon, encompassing every sphere of corporate activity. Thus, the field of Media and entertainment is also no exception to this rule. There has been an increasing tendency towards Merger and Acquisition in the field of Entertainment and Media as noticed over the last few decades. The motive forces behind this increase is usually a result of the old and traditional media companies to reinvent themselves, and take advantage of the current all pervasive nature and status of new media.
For a historical timeline of all the major merger and acquisition in the field of Entertainment and Media refer to the next page.
Figure 1Timeline for the biggest Merger & Acquisition in Entertainment and Media since 1990’s
Figure 2 Timeline for the biggest Merger & Acquisition in Entertainment and Media since 1990’s

Acquisition of Pixar by Disney

The Merger and Acquisition case to be examined in this study is that of the Acquisition of Pixar by Disney in 2006.
This particular case is of special relevance because today’s animation is one form of media that has a global presence and is noticing probably the fastest growth among all other mediums from its line. The demand for and reach of animation expands and touches both traditional forms of media and new media. Previously though the animation was looked upon as a sector catering solely to children, today its target audience includes every age demographic, and consequently those operating in the field also includes every kind of entity beginning from individual artists to corporate behemoths like Walt Disney. In short, Animation is booming industry today with immense potential for tomorrow.
Out of all the western companies that have dominated and contributed considerably to the evolution of the animation world, Disney and Pixar remain at the forefront. Therefore, the Merger and Acquisition between both of them have far ranging consequences, which will be explored below.

Walt Disney

Ever since its inception in 1923, Disney has been responsible for providing quality entertainment, and more or less dictating the terms of the industry. Presently there are four subsidiaries of the company, which are media networks, parks and resorts, studio entertainment, and consumer products.
The first segment of the company since its birth Walt Disney studiois in charge of the productionand/or distribution of animated features and motion pictures. It is also one of the primeproducers of Broadway musicals and includes the music group under Walt Disney.
The second segment is Parks and resortssaw the first park opening in 1952 i. e. the Disneyland Park in Anaheim, California, ever since, the company has expandedthis segment globally.
The third segment of Disney consumer products debuted in the market in 1929 and since then the famous Mickey Mouse logo has achieved global recognition. Disney Consumer Product (DCP) includes everything from toys, home decoration, magazines and books, stationary, apparels, foods and beverages, interactive electronics, games, and fine arts.
The final segment is Media networks. This includes all forms of broadcasting, radio, publishing, cable, and Internet businesses including ABC and ESPN.
Overall, The Walt Disney Company started by brothers Walt and Roy Disney is one of the largest, globally operating entertainment companies today. It had been one of the progenitors of the animation world and currently is a market leader in the same.


On February 3rd, 1986, Steve Jobs purchased the computer graphics unit of Lucasfilm, Ltd for $10 million to establish an independent company, Pixar.
Pixar though followed Disney in terms of chronology, with time turned out to be one of the biggest influences in the field of animation. It includes an Academy Award-winning computer animation (CG animation) studio with expertise in making a new generation of movies and related merchandise. The Pixar team contributed significantly to the field of software innovations, and with the release of Toy Story, revolutionized the field of animation.
The Studio had seen success in various forms ever since its start including the Golden Gate Award for Red’s Dream and the 1988 Academy Award for Tin Toy.
In May 1991, both Pixar and Disney entered into the Feature Film Agreement whereby Pixar would develop three computer animated feature films which would then be marketed and distributed by Disney. From here on started the collaboration between both the companies, which was to finally result in Disney’s acquisition of Pixar in 2006.

Imperatives of the Merger and Acquisition

While both companies were collaborating with each other since the early 90s and the results were shaping the world of animation for permanent, yet there were often frictions between both companies, at the helm of which was issue of release, distribution and sharing of revenue and profits of the landmark animated feature film ‘ Toy Story’. Due to the continuation of such problems, by 2004 PIXAR started looking for a partnership with rivals of Disney, an endeavor which if came to fruition would have harmed Disney greatly. Thus, by 2006 Disney announced its plan to acquire PIXAR for a staggering sum of $7. 4 billion.

The main effects of this acquisition were:

– As a result of the acquisition the market has witnessed the birth of giant in the field of animation. Pixar’s innovations in the field, stellar performance in delivering quality products consistently when matched with Disney’s investment and name, led to the formation of the biggest name in the business.
– The alliance led to a reduction in competition for both companies and enhanced the quality of Disney’s work further.
– It made competition stiffer for their competitors.
– The Acquisition helped Disney find back its footing in the field once again, which it is struggling to hold on to in the face of competition for companies including Pixar. PIXAR made it easy for Disney to step into the CGI world, and find its way back in the field.
– This move helped both companies focus on their strengths.
A better idea of the imperatives can be understood by applying to the tools of SWOT analysis and PEST Analysis to the company’s individually before the Acquisition and collectively after it.

SWOT Analysis of Disney before Pixar Acquisition

Swot Analysis of PIXAR before Acquisition
Post Acquisition both companies joined forces to balance out each other’s weaknesses and the current scenario is
Swot Analysis of Disney after Acquisition of Pixar
PEST Analysis of the Acquired Pixar (Now Disney)
Political factors – Political environment of any nation has a direct bearing upon the functioning of any company, here both Disney and Pixar, have been fortunate both before and after the acquisition as they are based in the US. The government and the political environment of US has mostly been stable after the World War II, which has positively affected its work and corporate culture. However, from time to time, the FCC regulations have imposed certain restrictions, but none such which have adversely affected the companies in question.
Economic Factors–Being a superpower and a first world country US had afforded both companies an economically stable environment where each saw impressive turnover until the slowdown of the global economy. By this time PIXAR had already been acquired by Disney for a whopping amount of $7. 4billion, thus, putting more pressure on Disney for the recovery. Due to the slowdown thus, Disney witnessed a drop in its revenue as shown in the table below.
However, since then there has been a gradual betterment. Even after the hard winters of 2013, when there was a sudden sluggishness in the American economy, the second quarter has seen the economy accelerate at 4. 6% thus improving market conditions all over. As a result of the bettering of economic conditions since the global meltdown, therevenues generated by Disney as can be seen from the following table have also improved:
Social Factors – Disney in a variety of fields, and Pixar in the field of animation and innovation, have offered the dream jobs for many and include employees from every age group. While Disney has a to-down, hierarchically defined organization, PIXAR has a habitat based one, where employees are allowed more freedom and an informal working environment, this leads to greater loyalty and retention of employees. Even after the acquisition of Pixar, it had stressed that its working structure remains the same, thus ensuring no change took place in its HR policy, and this way the work cultures affecting the employees of either company have not worked in adverse of each other (Bunk, 2006) (Press Releases, 2006). Outside its employees, both companies are known for their quality customer care. While PIXAR satisfies its customers with heart warming movies, Disney is renowned for excellent client service. This is the reason why generation after generation of viewers are not only loyal to Disney’s shows and products, but also why their theme parks and resorts are so widely popular and loved.
Technology Factors – While Pixar has been widely acclaimed for its innovative nature in its line of work, Disney is often staggering behind. Hence, the acquisition has helped the latter to fill up this gap; while the latter’s resources and business expertise has allowed the former to largely focus on this very strong suit of it. Further, Disney has made it a part of its Mission and Vision to commit itself to the constantly evolving world of technology and has therefore Disney Infinity, Disney Interactive and much more (the World Disney Company Fiscal Year 2013 Annual Financial Report And Shareholder Letter, 2013).

Mission and Vision

Walt Disney mission statement 2013 -“ The Walt Disney Company’s objective is to be one of the world’s leading producers and providers of entertainment and information, using its portfolio of brands to differentiate its content, services and consumer products. The company’s primary financial goals are to maximize earnings and cash flow, and to allocate capital toward growth initiatives that will drive long-term shareholder value.” (he Walt Disney Company Investor Relations, 2013)
Pixar’s objective is to combine proprietary technology and world-class creative talent to develop computer-animated feature films with a new three-dimensional appearance, memorable characters and heartwarming stories that appeal to audiences of all ages (Pixar Animation Studios History).
Thus, even from a cursory look of both the mission statements it is clear that where Disney’s chief focus and area of expertise is business, that of Pixar is creation of heart warming content for all ages, which combines the best of current technology.

Impact of the Acquisition

On the basis of what has been already pointed out in this study, it is clear that both the companies have benefited substantially from the Merger & Acquisition, as each has balanced out the others weaknesses. However, though on paper the acquisition seemed like the best investment opportunity for Disney, 8 yrs forward it has still not proven so. According to Box Office Mojo, till 2012 “ Toy Story 3,” “ Brave, ” along with other movies have amounted to $4. 5 billion worldwide, of which, assuming Disney makes 15 percent, it got $675 million of pretax profit (GOLDFARB, 2013).
Consumer products are the second largest revenue generators have generated around $580 million of profit before tax for Disney. DVD sales made around $900 million, the average annual profit from Pixar around $390 million. Further, in 2012 Disney pumped in another $1 billion in renovation of its California Adventure park, which got new Pixar-themed rides. Deducting all the taxes the company had to shelve out, it is yet to make up for its investment. Nonetheless, Disney operates on the share market daily at much higher values than its competitors, and PIXAR was acquired in with a long term investment view; hence with the Star Wars and Marvel franchise yet to hit the market, Disney might just get rewarded substantially very soon.


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