Pixar Walt Disney Case

Submitted by Group 7
Amod Velingkar (PGP/21/133)
Mohit Mishra (PGP/21/156)
Praveen Nirapure (PGP/21/166)
Ritika Gupta (PGP/21/173)
Case Framework for Disney: Supports Acquisition

Outcome: Pixar has more bargaining power and is looking to increase its revenue
streams thus acquisition in place of alliance would be beneficial in the long term
Factor Type of Factor Strategy Reason
Type of Synergies Reciprocal Acquisitions They would jointly work on any
project which would require
certain knowledge sharing process
Nature of Resources High Equity Alliances Primarily soft resources in terms of
the creative talent of Pixar as they
would move from hand made to
CG animations
Extent of Redundant Medium Equity Alliances Disney would eliminate its hand
Resources made animation to make way for
CG studio
Degree of Market Medium Acquisitions Being in the field for 10 years, Pixar
Uncertainty with its proprietary technology has
made quite a name in the industry
Level of Competition High Acquisitions Apart from the established names
in the industry, several small
players are also coming in the field
Contract Analysis: Strengthens Pixar’s Position

For greater visibility please refer the excel

Further Analysis: Renegotiation with Pixar not a viable
option
Outcome: Disney revenue share would drop based on the new agreements and
in addition loose future revenues as the rights would be returned to Pixar
 Financial Scenario: Acquisition without Synergy
looks financially attractive
For the combined entity,
 Exchange ratio = 2.3:1 (Disney : Pixar)
Microsof t Excel
Worksheet
 Tax rate assumed to similar to Disney's for
the year 2005
 Total revenues etc. have been taken as
that
 Disney's growth rate assumed to be 5%,
assumed as 12.5% (last 5 years CAGR) for
Pixar

Comparison by multiples

Sensitivity Analysis:
Exchange Ratio
 The Theory of the Firm: Various theories also
support acquisition

Transaction Cost of Economics Principal-Agent Theory Property Rights

 Acquisition would result in
lesser frequency of
negotiations
 Relationship specific assets
are locked into each other
which make acquiring
desirable (e.g.
Employment of John
Lasseter)
Outcome: Acquiring Pixar in
place of an alliance
 Disney could own the  Rights on any matters
ownership rights which can which otherwise would
be aligned with the have been negotiable and
creative control of Pixar cost consuming to be with
Disney
 The role of Michael Eisner
former Disney CEO in the  Provision of generic
negotiations with Steve software by Pixar
Jobs
Outcome: Acquiring Pixar in
Outcome: Acquiring Pixar in place of an alliance
place of an alliance
Post Acquisition Scenario: Risks and Remedies
Risks
 There would be a clash in the
working culture of Disney & Pixar
 Influence of Steve Jobs and
Apple
 High risk of losing Pixar’s creative
talent after acquisition
Remedies
 Pixar to be left as a independent
production like Miramax
 Give Steve Jobs a place in the
board to increase his stake in
Disney
 A joint resolution body to resolve
differences
 Retain creative heads such as
Catmull, Lasseter by promoting
them up the Disney hierarchy
 Framework for Pixar

Factor Type of Factor Strategy

Type of Synergies Sequential Equity Alliances

Nature of High Equity Alliances

Resources

Extent of Medium Equity Alliances

Redundant
Resources
Degree of Low Acquisitions
Market
Uncertainty
Level of High Acquisitions
Competition
Thank You