The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?

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1) The acquisition of Pixar would be beneficial to Disney due to how both companies’ businesses are related. This related acquisition would lead to the formation of more synergies and hence create value through the integration of their resources and capabilities. By acquiring some of Pixar’s core competencies and strengths, Disney may realise a new growth potential while reinforcing its strategic competitiveness. Firstly, the acquisition would cause Disney’s market power to rise due to the increase of its resources and capabilities to compete in the industry and also a greater share in the market. This is of great importance due to the intense competitiveness in the industry that is dominated by only a few key players. Any increase in…show more content…
Thus the acquisition of Pixar was necessary for its survival. In addition, by having access to the Pixar brand and its characters, they would help to supplement Disney’s existing characters across its different businesses like theme parks, merchandise, and television, which provide more sales opportunities. Despite the dilution of Disney’s earnings per share, it is for the short-term. The acquisition fills a crucial strategic gap for Disney and can create long-term value for its shareholders. As such, Pixar is a “near perfect strategic fit” for Disney and hence should be acquired by Disney to remain competitive. 2) Pixar had a few alternatives besides being acquired by Disney. One alternative for Pixar was to vertically integrate forward and enable distribution of its own content instead of relying on Disney by acquiring smaller media companies. However, this would be a highly unrelated diversification for Pixar and possibly create diseconomies of scope. Pixar would also face rigorous competition from other media conglomerates like Disney, Universal and Paramount. Pixar, being a leader in CG animations and having an exemplary track record of producing blockbuster hits, had a lot of potential suitors which include Warner Bros., AOL, Time Warner, Fox and Sony. Any media companies that strikes a deal with Pixar may instantly forefront the animation market.

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