Home > Free Essays > Business > Management > Risks to Disney Consequent on Acquiring Pixar
Cite this

Risks to Disney Consequent on Acquiring Pixar Case Study


Disney acquired Pixar for $ 7.4 billion, which obviously is a whopping sum. Purchase at such a high price reveals Disney’s eagerness to gain Pixar’s animation capabilities, talent and the creativity culture that are the latter’s unique features. Disney, however, will have to confront several risks in achieving the goals of this acquisition.

Disney’s acquisition of Pixar was of utmost importance to Disney because the acquisition provided Disney the world’s most famous computer animation studio along with its human talent. The benefits for Pixar in such an acquisition were that Pixar could access Disney’s marketing and distribution capabilities. On the basis of such an agreement Disney acquired Pixar during January 2006.

Disney’s acquisition of Pixar had always proved to be fruitful and had resulted in the production of several blockbusters. This acquisition had also helped Disney to establish a close rapport to Apple and its chief Steve Jobs who was a genius besides being a visionary. With his participation Disney could increase the digital content through Apple. Steve Jobs, the then CEO of Apple had assisted Disney in availing better technological advice and this had enabled Disney to enhance their creative capabilities and innovativeness.

Thus, the benefits for Disney due the takeover of Pixar were tremendous. However, on the flipside, there were several risks also. These mainly concerned with the return on investment. Since the value that Disney paid for the acquisition was far too higher than the actual worth, it would take Disney a much longer period to recover any return on the investment, though they can rest assured of appropriate returns.

There were, however, no technological risks. Another risk was that paying such a premium price for this acquisition deal would bring in financial losses for the firm due the return on investment period being too long. This, albeit temporarily, would reflect as loss in the company’s accounts, which may reflect adversely on their stock prices.

Another risk that Disney faced during the acquisition period was the entry of Steve Jobs into the directorial board in the newly merged firm. Being a popular icon in the business world, he could easily surpass Disney’s CEO, Robert Iger.

This could result in the business being dominated and spearheaded by Steve Jobs and Robert Iger being sidelined. This was one of the fears shared by Disney team during the acquisition process, who thought that the merger instead of partnership with Pixar, “might make Iger second to the powerful and experienced Jobs” (Disney’s Acquisition of Pixar par. 4).

Pixar’s teams had extraordinary creative talent pool which would force Disney to become highly dependent on Pixar’s employees and this allowed Pixar the power to negotiate at a very high price for Disney. Thus, Disney had no option other than to pay the premium price because otherwise Disney would be losing its business.

Disney also had to compromise on other grounds. For example, Iger agreed to a long list of guidelines which protected Pixar’s creative culture even though the two firms were merged and known as one firm. It was quite understood by the CEO, Robert Iger that Disney could not stand alone and compete in the market without the merger with Pixar.

This allowed Pixar to raise its acquisition price because their stocks were, doing pretty well in the market. On the other hand, Disney sustained several flops in its creative films which had very severely impacted the prices of its share in the market.

Therefore, even though Disney was the acquirer firm yet they had been forced to compromise on several aspects because they considered this acquisition to be crucial for their survival and thus agreed to pay a premium price.

Work Cited

Disney’s Acquisition of Pixar. ICMR: IBS Center for Management Research. 2006. Web. <>

This case study on Risks to Disney Consequent on Acquiring Pixar was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.
Removal Request
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda.
Request the removal

Need a custom Case Study sample written from scratch by
professional specifically for you?

Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar

301 certified writers online

GET WRITING HELP
Cite This paper

Select a citation style:

Reference

IvyPanda. (2019, June 14). Risks to Disney Consequent on Acquiring Pixar. Retrieved from https://ivypanda.com/essays/risks-to-disney-consequent-on-acquiring-pixar/

Work Cited

"Risks to Disney Consequent on Acquiring Pixar." IvyPanda, 14 June 2019, ivypanda.com/essays/risks-to-disney-consequent-on-acquiring-pixar/.

1. IvyPanda. "Risks to Disney Consequent on Acquiring Pixar." June 14, 2019. https://ivypanda.com/essays/risks-to-disney-consequent-on-acquiring-pixar/.


Bibliography


IvyPanda. "Risks to Disney Consequent on Acquiring Pixar." June 14, 2019. https://ivypanda.com/essays/risks-to-disney-consequent-on-acquiring-pixar/.

References

IvyPanda. 2019. "Risks to Disney Consequent on Acquiring Pixar." June 14, 2019. https://ivypanda.com/essays/risks-to-disney-consequent-on-acquiring-pixar/.

References

IvyPanda. (2019) 'Risks to Disney Consequent on Acquiring Pixar'. 14 June.

More related papers