By Priyamvada Jain
On May 5, 2006 the two esteemed companies Disney and Pixar merged. Disney acquired shares worth $7.4 billion in Pixar and made it Disney’s subsidiary. Since then it has been reported as one of the most successful mergers of times.
The Walt Disney Company was founded on October 16th 1923 by brothers Walt and Roy Disney. It is one of the largest media and entertainment corporations in the world. It is the owner of 11 theme parks and several television networks, including the American Broadcasting Company (ABC). Disney started making films in the 1930’s.Some of their first films were Snow White, Bambi and Pinocchio. A lot of their earlier films were animated adaptations of children’s fairytales. Pixar Animation Studios was started by John Lasseter & George LucasPixar was initially a computer graphics division owned by film maker George Lucas known as Lucas film limited.In 1986, Steve Jobs purchased the computer graphics division of Lucas Film Ltd. for $10 million and established it as an independent company named Pixar , co-founded with Dr. Edwin E. Catmull. On November 22, 1995, Pixar Animation Studios forever impacted the future of filmmaking with the release of its first feature film, Toy Story. The film went on to become the highest grossing film of 1995 with $362 million.
Prior to the merger in 1997, after the release of Toy Story, a 10-year, 5-picture deal was signed, evenly splitting production costs and profits on subsequent movies. Disney alone retained rights to the films and characters. In addition, Disney collected 10 to 15 percent of each film’s revenue as a distribution fee. But Pixar and Disney had ongoing disagreements since the production of Toy Story 2. Originally intended as a straight-to-video release (and thus not part of Pixar’s five picture deal), the film was upgraded to a theatrical release during production. Pixar demanded that the film then be counted toward the five picture agreement, but Disney refused. There were talks of Pixar searching for new distributors. But with Mr. Iger taking the position of Disney’s CEO the conflicts between Pixar and Disney were resolved and on January 24, 2006, Disney announced that it had agreed to buy Pixar for approximately $7.4 billion. Disney offered 2.3 shares of its stock for each Pixar share. That’s a 3.8% premium on Pixar’s closing price of $57.57.
Overall it was a successful integration. This can be seen from the following.
|Cars 2||2011||$552 M|
|Toy story 3||2010||$1063 M|
|Wall E||2008||$521 M|
The key reasons for the success of the merger of the two companies was that investors saw potential for Disney to leverage on Pixar’s computer animated character to be used in its vast networks. One successful example was “cars”. The revenue in retail products from “cars” was over $5 million. Pixar’s willingness to change so as to be a part of the international conglomerate helped. Pixar not only developed new movies but also sequels of original ones. Executives also chained their minds of alternative production channels: direct to dvd was accepted as a part of Disney-Pixar portfolio. The experience of Bob Iger in the field of merger helped the two companies greatly. The companies not only followed normal tactics for successful mergers but also came with some different ones. Pixar created a list of things that would not be changed so as to preserve its culture like Pixar employees didn’t sign employment contracts as it believed “We’ve never had to go back and look at it. Everything they’ve said they would do they have lived up to”. Bob Iger ensured that Pixar employees get mixed in the new environment. He gave Pixar employees new responsibilities and tasks to increase the efficiency of Disney. Finally the transformational leadership at Pixar was brought to Disney. Their ability to lead and motivate employees in a way that they easily adapt to the dynamic environment was legend and Disney adopted it.
Priyamvada Jain: Presently pursuing BCom( Hons) from the Shri Ram College Of Commerce and have successfully completed my 1st year. She aspires to do an MBA in the field of Finance. Has worked with Ernst and Young in the past and is constantly associated with the Rotary Club. She can be contacted at jainpriyamvada@gmail.
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