This case study analyses and differentiates the merger and acquisition strategy for the companies of Disney and Pixar, In the first section, you will find the brief analysis of the market share and competitor overview of the Animation, production and CG industry . In the next two sections, the detailed analysis of the companies Disney and Pixar are considered with respect to the acquisition regarding the view of each firm respectively. The fourth section explains complementary and counter-arguments and an analysis of a strategic merger and acquisition proposal for each company respectively. The final section: conclusion, interpretations, assumptions and suggestion showcase the final thoughts interpreted through the strategic merger and acquisition analysis.
Animation market analysis and prominence:
With the evident box-office hits of animation and 3D-Computer graphic films namely Toy story, Finding Nemo, there was a sudden competitive rise in the CG industry as a whole, production companies fought internal battles in-order to dominant the market. Pixar was one of the top contenders in this competitive market, followed by DreamWorks. Disney had a few box-office hits in 2D animation during this period of 2D animations: like snow white, 1934; but, was struggling to keep up with the technological computer rendering production studios, this is where the conflict arises and raised the argument: whether Disney should acquire Pixar or not. With the event of having a limited 5-film partnership, is it in Disney’s best interest to acquire Pixar? Will Pixar’s freedom and unchained creativity fit and be complementary to Disney’s governance or will be do more harm than good? This is the present dilemma in this case-study: Also, whether Disney has to acquire Pixar in-order to achieve competitive market advantage?
Strategic-Cooperative analysis of Disney’s and Pixar’s Relationship:
Disney and pixar first collaborated with each other to create Computer Animated Production Systems(CAPS), this relationship was enhanced due to the hit of Disney’s Rescuers Down Under and Lion king. This proved that the strategic cooperation between these two studios created extraordinary results, utilizing Disney’s storyboard and strategic Brand and Pixar’s high-end 3D-rendering tools and productions.
Feature film agreement:
Disney and Pixar signed its first business contract in the production of feature films, where the owning rights of movies belonged to Disney and the pixar was payed a participation fee based on the profits. Co-production agreement:
The major agreement where, the company’s distributed profits inclusively to only movie productions where pixar and Disney held 40% and 60% of the productions profits respectively. Disney also had acquired 5% of the Pixar during its initial IPO which led to a more beneficial cooperation.
The co-production agreement also covered ancillary revenue streams of Home video, Television, Licensing agreements, and Merchandise and games.
In 2002, pixar and Disney negotiated a deal where 100% of the ownership of the film goes to pixar, where as the distribution fee was lowered in favor or Disney. Finally, the deal was closed where disney got rights to pixar’s films and Pixar had the rights of any of the film’s sequels.
Eventually due to the flop- Disney produced sequels of hit series such as Cinderella, caused tension between the two studios, which led to the demeanoring leave of pixar from Disney in the favor or other potential host studios such as sony, Warner Brothers, and 20th Century Fox.
This was a huge loss especially in the context of Disney, which disambargled a change for extreme market domination at early 2000.
Strategic Suggestions, recommendations and conclusion based on the above strategic merger and acquisition analysis:
Agreeing with Bob Iger point of view in the brand value and recognition and its evasive evidence that it has sustainable global recognition is not because of of the brand value of Disney but due to the entertaining, life-like, heart-sunk characters which they embodied in their animated films, which allows them to go to unrecognized places and create a global impact through its animation and films.
I believe pixar has the same vision intricately when regarding the context and views of Disney, but differ in their exuberant paths to achieve these desired results. In my review of this issue on whether to merge Disney and Pixar, a partnership with continued and shared equity with the production costs going to Disney and the for the cost of creation going to pixar, where the distributed profit structure though may sound intimate and anxious in the present field of negotiation, But the action of Disney acquiring Pixar would help in the long run bearing both the companies future prospects in mind for profit, growth , and Impact will truly outshine its partnerships and help diverse in the global competitive market of CG animation and 3D-render productions in film, but with only a few conditions will this certain phase of action seem viable to the success of the merger.