Disney Acquisitions and Mergers Term Paper
The Walt Disney Studio is an American corporation film studio that comprises of four major businesses, namely, Media Networks, Parks & Resorts, Studio Entertainment, and Consumer Products & Interactive Media. The first and main component of the business is the Walt Disney Company. This component is the studio entertainment segment of the company. The second business of the company is The Walt Disney Studio. This business segment is popularly film known for its multifaceted division. The studio is one of Hollywood’s main motion picture studios and is established at the eponymous Walt Disney Studios. The workshop was instituted in 1923 and is the fourth oldest among the core studios in the organization.
Disney Pixar–Marvel–20th Century Fox Mergers and Acquisitions
20th Century Fox
The $71.3 billion acquisition of the 21st Century Fox by Disney is nearing completion. This deal by Disney is a historical one as it marks the latest series of major acquisitions that the company has made.
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The merger of Disney and the Fox Broadcasting Company effectively reduced the so-called “Big Six” Hollywood studios to the “Big Five”. As a result, this event would effectively allow Disney to control approximately 42% of the current returns from box offices. However, the acquisition could only go through if the department of justice would approve the $52 billion deal . Despite the people’s eagerness to see the X-Men and Fantastic Four join the Marvel Universe, the new merger involves numerous issues. First, the acquisition of Fox Broadcasting Company will inevitably result in considerable loss of jobs of thousands of employees for The Walt Disney Company and Fox Broadcasting Company. Second, the acquisition has allowed The Walt Disney Company to take control of franchises such as X-Men, Deadpool, Kingsman, Avatar and Die Hard . This outcome means that the returns from all shows that The Walt Disney Company develops in accordance with the franchises identified above would be solely reported by Disney.
Marvel Entertainment, LLC
Marvel Entertainment, LLC, formerly known as Marvel Enterprises and Toy Biz, had a series of losses that started late in 1995and eventually declared bankruptcy. During this period, Marvel reported its first annual loss from its operations under Perelman. This downfall was the main reason that triggered the acquisition of the company by Disney. The loss was attributed to the large size of the company coupled with the shrinking market. This event forced the company to lay off 275 employees. The financial issues that the company was facing continued until its acquisition in 2009 by Walt Disney.
In 2009, Walt Disney effectively acquires Marvel’s assets at a price of $4 billion. This action was announced by The Walt Disney Company on 31 August 2009 . The purchase price of Marvel allowed the shareholders of Marvel Entertainment, LLC to receive $30 and 0.745 of the shares by Disney for each share of Marvel they had previously owned.
As a result of the acquisition, Disney issued 59 million new shares with the plan of repurchasing them back at a high percentage of the shares within the first 12 months after their issuance. Although Marvel had launched several action hero movies over the last decade, poor management may have been blamed for the unsatisfactory performance of the company. Marvel Entertainment produced Iron Man after its acquisition by Disney. The movie was a blockbuster that enabled the new conglomerate to earn approximately $100 million only in the first three days. Iron Man was the first movie by Marvel to be completely financed and produced by the comic book company. The main impact resulting from the acquisition of Marvel was the considerable increase in theirs shares, which soared upward by 26% whereas the shares of Disney went down almost instantly by 3%, according to the Fortune 500.
Disney channel, commonly known as the House of Mouse, acquired Pixar in 2006. Pixar was an animation studio that was owned by Steve Jobs. Bob Iger aimed to secure a deal with Pixar that resulted in Disney purchasing the animation film studio at a stock purchase price worth $7.4 billion. This transaction was a purchase that gained considerable attention of the public but eventually proved to be a smart move in the career of Iger. After the acquisition of the company, Pixar started to restore their past glory that they had enjoyed between 1989 and 1999. During this period, the company produced numerous classic cartoons, such Beauty and the Beast, The Lion King, The Little Mermaid, and Aladdin. After the acquisition, the company has started to enjoy improved growth with the help of cartoon movies such as Zootopia and Finding Dory, which led their way to the box office. Currently, the cartoon movie Frozen from 2013 holds the all-time record of $1.3 billion in universal earnings since it was released.
After the purchase of Pixar, Disney’s chief executive officer Bob Iger facilitated improvement on the collaboration between Disney and Pixar by positioning Pixar’s president Edwin Catmull together with the principal creative officer John Lasseter in control of the Walt Disney Animation Studios . The two personalities have a good track record as they are both visionary and revolutionary individuals. However, it later became clear that the formula that worked for Pixar could not work for Disney. As a result, Iger together with directors and shareholders decided to keep the operations of the two businesses separate . At the time Pixar was purchased by Disney, Disney was in distress from imaginative and artistic uniqueness predicaments and management issues. Conversely, it was resolved that if Pixar’s creation team operated to support Disney, then the result would not be reflected as Disney’s triumph. Nonetheless, the two corporations have eventually begun taking time to cooperate to develop creative ideas for both companies.
Lucasfilm Ltd. LLC
Lucasfilm Ltd. LLC is a film and television production company with headquarters in San Francisco, California. The company is best known for producing franchises such as the Indiana Jones and Star Wars. The company is also a leader in the film industry in the development of computer animation films, special effects, and sound effects. In October 2012, The Walt Disney Company acquired Lucasfilm for $1.855 in stock and $2.2 billion in cash . This transaction was an investment that totaled $4.05 billion. This acquisition is the fifth largest deal that Disney made (Krantz et al., 2012).
The acquisition of Lucasfilm proved to be one of the smartest moves that The Walt Disney Company made. As a result of the acquisition, Disney recovered the total value of their investment plus profits in only a few years. The four Star Wars films that Disney produced after it acquired Lucasfilm have an estimated $4.8 billion in gross sales at the box office.
Miramax was acquired on 30th June 1993 and later sold to Filmyard Holdings on 3 December 2010. Despite these changes, Miramax played an extremely crucial role in the growth of Disney. The company was founded in 1979 by the Weinstein brothers. The company became popular as a result of their continuous production and distribution of films and television shows. Miramax, LLC, improved its creativity and financial independence after it was acquired by The Walt Disney Company. In 2005, the company had complete control over its operations, and Disney founded The Weinstein Company.
Miramax was the first company that Disney acquired at an estimated price of $60 million. One important undertaking by Disney after the acquisition of Miramax was that they provided the two brothers with the autonomy to run the company. As a result, Disney gained access to prestigious films that they had trouble producing in the past. At the time of its acquisition, Miramax was producing between 15 and 25 films annually. The release of these films helped to boost Disney’s box office reach with the speculation that the company would start to distribute approximately 40–50 films annually . This estimate meant that the company would double the number of films that were being produced by their closest rival. However, when Disney acquired Miramax, the company had enjoyed one of its biggest hits, Madonna: Truth or Dare. This film centered heavily on steamy adult sexuality. As a result, the release of the film compelled Disney to push the boundaries of their wholesome image.
Capital Cities/ABC Inc./ESPN
In 1985, Capital Cities Communications Company purchased the much larger American Broadcasting Company (ABC), which resulted in the creation of the American company, Capital Cities/ABC Inc. Disney managed to strike a deal to acquire Capital Cities/ABC Inc. for $19 billion. This venture was the second acquisition that Disney made. The company negotiated unusual secrecy over the acquisition of Capital Cities/ABC Inc./ESPN. The deal would play a crucial role in increasing the annual revenues for Disney from $16.5 billion that the company was reporting at the time. The acquisition of Capital Cities/ABC Inc./ESPN was expected to together the owners of the world’s most popular amusement parks. These companies include the Disney Channel, a major movie studio, the ESPN cable network, ABC, and a company that owns 10 TV stations and produced the film Pocahontas . In the opinion of the chief executive officer of Disney Michael D. Eisner, the acquisition was considered to be done at the right time and place. Although research shows that the national TV audience has slipped from approximately 90% to less than 60% percent in the last two decades, the stations that have an affiliation with NBC, CBS, and ABC still have the highest command of audience. The acquisition of Capital Cities/ABC Inc./ESPN by Disney may not have provided the company with a background to produce additional quality films. However, the venture provided an opportunity for the company to improve the distribution of their films. Finally, the acquisition helped the company to increase the number of audience with affiliations to their business.