Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

Pixar-Disney : Parting Ways

Abstract:
In 1991, Walt Disney Company (Disney) and Pixar Animation Studios (Pixar) joined hands to produce three full-length animated movies. Under the agreement, Disney had the control of marketing and licensing of the movies, while Pixar was to be paid a share of the profits towards the development costs. After four years, they released their first movie, Toy Story, that turned out to be a hit. After the success of Toy Story, Pixar re-negotiated the terms of the agreement in which it was agreed that both the partners would share the profits equally, after Disney was paid a distribution fee of 12%. In 1998, a year after the new deal was struck, A Bug's Life was released that turned out to be a major hit. In 2003, after the release of their biggest hit, Finding Nemo, Pixar wanted to further re-negotiate its terms with Disney under which it wanted to retain the entire profit and pay Disney, only the distribution fees. After several months of negotiations, Disney and Pixar decided to cancel their twelve-year partnership in January 2004.

Pedagogical Objectives:

• This case study throws light on the reasons for the breakup of potentially profitable partnerships in the film making industry.

Keywords :  Walt Disney Company;Mergers, Acquisitions, Alliances Case Study; Pixar Animation Studios; Steve Jobs; Michael Eisner; 3D animation; Lucas films; Finding Nemo; Star Wars; Toy Story; Buena Vista; Disney World; Disney Land; Bob Iger; Cartoon network; Mickey Mouse