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4 pages/≈1100 words
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MLA
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Business & Marketing
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Research Paper
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English (U.K.)
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Topic:
Advanced Corporate Finance FIN 4610: Disney Company (Research Paper Sample)
Instructions:
Pages: 4
Format: mla
Time: 21hrs
Sources: 5
M&A Analysis of a Large U.S. Non-Financial Corporation
Term Project – Research Report
Advanced Corporate Finance
FIN 4610
Select a large U.S. non-financial publicly-traded corporation and download its more recent 10-K or annual report. Use this company to write a report that covers all points outlined below. Make sure the report is professionally written.
• Select the largest acquisition made by the company:
o Provide an overview of the target company's business, risks, and financial position prior to the acquisition.
o Describe what you believe to be the bidder's motivation behind acquiring this company and identify potential synergies and costs related to this acquisition.
o Classify the type of acquisition and provide an overview of the acquisition process and timeline.
o Provide a detailed description of the financing structure of the acquisition (e.g. cash purchase, stock purchase, etc.) and assess the strengths and weaknesses of the chosen financing structure.
o Evaluate the performance of the bidder post-acquisition and assess the success of the acquisition in terms of value created for the bidder relative to the costs of the acquisition (i.e. did the synergies materialize? Were they higher than the costs?). Use the framework provided on the course textbook.
o You may evaluate the deal in relation to any other concepts covered in the course textbooks (e.g., defensive tactics used by the target company, pre- and/or post-acquisitions divestitures and restructurings, etc.).
• End the report with a “Highlights” section where you identify the key points made through the report as well as the key findings from your research. Also, write an “Executive Summary” and add it to the front of the report."Executive Summary" for my part
- the sample is on Disney company in professionally responding to the above questions.
Content:
Name
Tutor
Course
Date
Disney Company
Executive Summary
The acquisition of Pixar has greatly improved Sidney's animation, which has been seen as a critical creative engine for driving growth across its businesses. However, Disney currently faces difficult decision regarding its relationship with Pixar. Although previous collaborations with Pixar have brought immense success for Disney in terms of revenue and recognition, Pixar’s CEO Steve Jobs has been trying to negotiate a fairer deal with no success. Disney wishes to stay with previous negotiation terms, as it is more favorable for Disney. Tension has increased between the two firms, and in response, Jobs began a searching for partnerships with other companies due to negotiation issues. This poses a threat for Disney, and Disney must make a decision on how to manage this current situation as soon as possible. Due to this, some of the decisions that Disney can make regarding to this issue include, full-on acquisition of Pixar, continuing the current relationship through renegotiation of a fairer deal, creating strategic alliances with other companies, outsourcing technology of future films, and internal development of computer generated animation technology capabilities in-house.
Aside from the acquisition, Disney should also extend a generous offer to Steve Jobs in order keep him happy as there would-be majority shareholder of Disney, and to keep Pixar employees satisfied and engaged. This could be achieved by ensuring that Pixar and Disney remain two separate entities in terms of organizational structure, protecting the individuality of Pixar artists and maintaining the valuable culture that made Pixar what it is today
Disney Company and its largest acquisition
The Walt Disney Company, located at the Walt Disney Studios in Burbank, California and founded in 1923 by brothers Walter and Roy Disney, is one of the largest non-financial corporations in the United States. Together with its subsidiaries, it is a diversified multinational mass media and entertainment conglomerate with operation in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.
The largest acquisitions made by the company was in January 2006, when it announced the buying of Pixar, the animated studio led by apple head Steve jobs, in a deal worth $7.4 billion (Gillam & Wooden, 5). The two companies were able to collaborate without barriers that come from two different companies with two different sets of shareholders, since as part of the deal, jobs was made a board member of Disney. The addition of Pixar enhanced Disney animation, which has been seen as a critical creative engine for driving growth across its businesses.
The target company’s business, risks, and financial position prior to the acquisition.
Disney mainly targets average income families, who live in urban areas. Almost all of the Disney Stores are located in large super-centers and malls; their theme park in the United States is located in Orlando and Florida. Their films as well as consumer products are conveniently priced for the average person. Disney Channel itself has shows for very small children and teenagers, and not much for adults. However, the vacation destinations are much more family-oriented and have activities for all ages.
The largest acquisitions made by the company was in January 2006, when it announced the buying of Pixar, the animated studio led by apple head Steve jobs, in a deal worth $7.4 billion. the two companies were able to collaborate without barriers that come from two different companies with two different sets of shareholders, since as part of the deal, jobs was made a board member of Disney.(Taylor & Barre, 11). The addition of Pixarenhanced Disney animation, that has been seen as a critical creative engine for driving growth across its businesses.
As per the company's financial position as at 2005, the company's assets were more than its liabilities. As a result, the company's current ratio was more than 1, a clear implication that the company was able to meet all its current liability obligations using its current assets. Disney also experienced a strong double-digit growth in its earnings per share that resulted from Company's strategy to achieve growth through great creative content, global expansion and application of new technology. During the year, before the acquisition, Disney also had a high debt-to assets ratio, implying that company is used a larger amount of financial leverage, which increased its financial risk in the form of fixed interest payments.
Bidders’ motivation behind this acquisition
Pixar always had a close relationship with Disney. As such, if anyone was going to acquire them, Disney was the obvious first choice. Disney would benefit by owning the world's most innovative computer animation studio, and Pixar would benefit from Disney's comfortablefinancial safety and first-class distribution network.(Holson, 22). Disney also wanted to bring back animation into the company.
Type of the acquisition, its process and timeline.
Pixar- Disney was a vertical acquisition because Pixar specializes in animation and Disney’s main aim is to create cartoon films using the animation. Therefore, this is an acquisition between two firms in the same industry at different stages of the production process. Moreover, it is called a vertical backward integration acquisition because Disney is buying Pixar who supplies the animation to them (Alcacer et al., 33). During the acquisition, Disney and Pixar made two types of alliances: Sales Alliance,both firms would act in their best interests to maximize their profits by marketing their products together. Investment Alliance,the animation pictures will be invested by both Disney and Pixar. Due to this, both will receive a 50% share of the profits made from the films. The timeline for Pixar acquisition was eight years, since their first interaction in 1991 when they signed cooperative agreement for five movies.
Financial structure of the acquisition, its strengths and weaknesses.
The purchase of Pixar was on stock basis. To purchase Pixar, Disney exchanged 2.3shares of its common stock for each share of Pixar common stock, resulting in issuance of 279 million shares of Disney and converted previously issued vested and unvested Pixar equity based awards into approximately 45 million Disney equity based awards. The acquisition purchase price was $7.4bilion in an all-stock deal. This price comprised of $6.4 billion of stock and Pixar's cash and investment of approximately $1.0 billion (Booker, 45). The value of this stock was calculated basing on the market value of the company's stock using the average stock price for the five-day period beginning two days before the acquisition announcement date on 24th January, 2006. The strength of this method is that in terms of the revenue, the stockholders got the higher share price from merging the two companies. Shares of Pixar gained nearly 3% from after-all hours trading and Disney's stock gained about 1.8% in regular trading. The weakness is that Disney spent billions of money before the acquisition was effected.
Evaluating Bidders post- acquisition performance.
The acquisition of Pixar had a great impact on Disney's performance. It allowed Disney and Pixar to exploit both their financial and organizational synergies. From the financial perspective, the merger increased Disney’s stock price. It also eliminated the trouble of coming to agreements regarding production and distri...
Tutor
Course
Date
Disney Company
Executive Summary
The acquisition of Pixar has greatly improved Sidney's animation, which has been seen as a critical creative engine for driving growth across its businesses. However, Disney currently faces difficult decision regarding its relationship with Pixar. Although previous collaborations with Pixar have brought immense success for Disney in terms of revenue and recognition, Pixar’s CEO Steve Jobs has been trying to negotiate a fairer deal with no success. Disney wishes to stay with previous negotiation terms, as it is more favorable for Disney. Tension has increased between the two firms, and in response, Jobs began a searching for partnerships with other companies due to negotiation issues. This poses a threat for Disney, and Disney must make a decision on how to manage this current situation as soon as possible. Due to this, some of the decisions that Disney can make regarding to this issue include, full-on acquisition of Pixar, continuing the current relationship through renegotiation of a fairer deal, creating strategic alliances with other companies, outsourcing technology of future films, and internal development of computer generated animation technology capabilities in-house.
Aside from the acquisition, Disney should also extend a generous offer to Steve Jobs in order keep him happy as there would-be majority shareholder of Disney, and to keep Pixar employees satisfied and engaged. This could be achieved by ensuring that Pixar and Disney remain two separate entities in terms of organizational structure, protecting the individuality of Pixar artists and maintaining the valuable culture that made Pixar what it is today
Disney Company and its largest acquisition
The Walt Disney Company, located at the Walt Disney Studios in Burbank, California and founded in 1923 by brothers Walter and Roy Disney, is one of the largest non-financial corporations in the United States. Together with its subsidiaries, it is a diversified multinational mass media and entertainment conglomerate with operation in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.
The largest acquisitions made by the company was in January 2006, when it announced the buying of Pixar, the animated studio led by apple head Steve jobs, in a deal worth $7.4 billion (Gillam & Wooden, 5). The two companies were able to collaborate without barriers that come from two different companies with two different sets of shareholders, since as part of the deal, jobs was made a board member of Disney. The addition of Pixar enhanced Disney animation, which has been seen as a critical creative engine for driving growth across its businesses.
The target company’s business, risks, and financial position prior to the acquisition.
Disney mainly targets average income families, who live in urban areas. Almost all of the Disney Stores are located in large super-centers and malls; their theme park in the United States is located in Orlando and Florida. Their films as well as consumer products are conveniently priced for the average person. Disney Channel itself has shows for very small children and teenagers, and not much for adults. However, the vacation destinations are much more family-oriented and have activities for all ages.
The largest acquisitions made by the company was in January 2006, when it announced the buying of Pixar, the animated studio led by apple head Steve jobs, in a deal worth $7.4 billion. the two companies were able to collaborate without barriers that come from two different companies with two different sets of shareholders, since as part of the deal, jobs was made a board member of Disney.(Taylor & Barre, 11). The addition of Pixarenhanced Disney animation, that has been seen as a critical creative engine for driving growth across its businesses.
As per the company's financial position as at 2005, the company's assets were more than its liabilities. As a result, the company's current ratio was more than 1, a clear implication that the company was able to meet all its current liability obligations using its current assets. Disney also experienced a strong double-digit growth in its earnings per share that resulted from Company's strategy to achieve growth through great creative content, global expansion and application of new technology. During the year, before the acquisition, Disney also had a high debt-to assets ratio, implying that company is used a larger amount of financial leverage, which increased its financial risk in the form of fixed interest payments.
Bidders’ motivation behind this acquisition
Pixar always had a close relationship with Disney. As such, if anyone was going to acquire them, Disney was the obvious first choice. Disney would benefit by owning the world's most innovative computer animation studio, and Pixar would benefit from Disney's comfortablefinancial safety and first-class distribution network.(Holson, 22). Disney also wanted to bring back animation into the company.
Type of the acquisition, its process and timeline.
Pixar- Disney was a vertical acquisition because Pixar specializes in animation and Disney’s main aim is to create cartoon films using the animation. Therefore, this is an acquisition between two firms in the same industry at different stages of the production process. Moreover, it is called a vertical backward integration acquisition because Disney is buying Pixar who supplies the animation to them (Alcacer et al., 33). During the acquisition, Disney and Pixar made two types of alliances: Sales Alliance,both firms would act in their best interests to maximize their profits by marketing their products together. Investment Alliance,the animation pictures will be invested by both Disney and Pixar. Due to this, both will receive a 50% share of the profits made from the films. The timeline for Pixar acquisition was eight years, since their first interaction in 1991 when they signed cooperative agreement for five movies.
Financial structure of the acquisition, its strengths and weaknesses.
The purchase of Pixar was on stock basis. To purchase Pixar, Disney exchanged 2.3shares of its common stock for each share of Pixar common stock, resulting in issuance of 279 million shares of Disney and converted previously issued vested and unvested Pixar equity based awards into approximately 45 million Disney equity based awards. The acquisition purchase price was $7.4bilion in an all-stock deal. This price comprised of $6.4 billion of stock and Pixar's cash and investment of approximately $1.0 billion (Booker, 45). The value of this stock was calculated basing on the market value of the company's stock using the average stock price for the five-day period beginning two days before the acquisition announcement date on 24th January, 2006. The strength of this method is that in terms of the revenue, the stockholders got the higher share price from merging the two companies. Shares of Pixar gained nearly 3% from after-all hours trading and Disney's stock gained about 1.8% in regular trading. The weakness is that Disney spent billions of money before the acquisition was effected.
Evaluating Bidders post- acquisition performance.
The acquisition of Pixar had a great impact on Disney's performance. It allowed Disney and Pixar to exploit both their financial and organizational synergies. From the financial perspective, the merger increased Disney’s stock price. It also eliminated the trouble of coming to agreements regarding production and distri...
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