DISNEY BUY PIXAR |
Pros | Cons |
Disney have the brand and distribution | External factors, such as increasing competition or a declining industry, can affect future growth |
Pixar have the technology and creative part | The seller’s personality and their established relationships may be a major factor for the success of the business |
Buying an established business means immediate cash flow | Influenced by Apple |
The business will have a financial history, which gives you an idea of what to expect and can make it easier to secure loans and attract investors | Culture between Disney & Pixar |
Acquisition of existing customer, contacts, goodwill, suppliers, staff, plant, ...view middle of the document...
One other aspect that can negatively influence the acquisition of Pixar by Disney is the financial stock dilution that can occur. On the positive side of the equation we verify that Disney has the brand recognition and the distribution channels needed. If Disney acquired Pixar, they would have access to the leading computer animation technology as well all the employees of Pixar that were known for their quality and high level of studies, since most of them held PhDs. This would cover the lack of computer generated animations skills of Disney. By buying Pixar, Disney would also acquire all the existing customers, contacts, goodwill, suppliers, plant, equipment, stock and like said before most importantly the human capital. Pixar would improve Disney’s capacity of profitability and would create more value by consolidating Disney dominant position in the market by eliminating competition. The acquisition of Pixar would also allow for Disney to revitalize the animation department. The buying of Pixar would support future growth with full potential by expanding and attracting new customer segments associated with Pixar. By integrating Pixar in Disney this would allow Disney to close the vertical chain. Together as a fully integrated firm they would perform every step in the vertical chain. We should not forget that normally consumers choose the finished good produced by the most efficient vertical chain. However if vertical integration is counterproductive the integrated firm will lose. By acquiring Pixar, Disney was also tying up channels that is known as vertical foreclosure and would foreclose its rivals by not providing any more supply to competitor firms. By entering in a merger agreement this would also affect the stock value of Pixar, because Disney was offering 2.3 shares of its stock for each Pixar share, meaning a 3.8% premium on Pixar’s stock value in 2006. The transaction would catapult Steve Jobs, who was the majority shareholder of Pixar with 51%, to Disney’s largest individual shareholder with 7% of Disney. If Disney decided to go for a buy the purchase price was 1 billion dollar in money and 6.4 billion dollars in stocks. The risk of this operation was the financial & stock dilution that may result from it, but we also should not forget the positive effect that Steve Jobs and Apple bring to this operation.
1. Joint Venture
A joint venture is a particular type of strategic alliance in which two or more firms create, and jointly own, a new...