Учебная работа. M&A (mergers and acquisitions) deal as an instrument that increases Disney’s Global competitiveness
M&A (mergers and acquisitions) deal as an instrument that increases Disney’s Global competitiveness
1.Theoretical part and Metrological Basics of M&A Deals as an Instrument That Increases Global Competitiveness
.1Factors that Ensure Companys Global Competitiveness
1.2Definition of Mergers and Acquisitions and their types
.3Motives and drawbacks of M&A Deals
2.M&A Deals of The Walt Disney Company and Their Role in Increasing the Companys Global Competitiveness
.1The Walt Disney Company, its Activity and Main Rivals
2.2Competitiveness Growth after M&A Deals of The Walt Disney Company
.3Contribution of TWDCs M&A deals to its global competitiveness
3.M&A Deal as an Instrument that Increases Disneys Global Competitiveness
.1Influence of M&A transactions on The Walt Disney Companys business segments
3.2Improving the weakest segment of The Walt Disney Company Using M&A Strategy
.3Advantages for The Walt Disney Company after acquisition of Activision Blizzard, Inc
current economic conditions many companies seek for effective development strategies in order to increase their global competitiveness, to have higher profitability and total value. Today one of such strategies is mergers and acquisitions deals. M&As is one of the most widespread ways of development used by the majority of successful companies. These transactions become the integral processes of the modern market relations.the level of competition in the majority of fields of activity has increased sharply. That is why there is a need for processes of mergers and acquisitions to ensure business growth for the company which seeks to take the leading positions in the world market. For this reason M&A deals can be considered as one of the most important mechanisms that ensure companys global competitiveness.experience in the area of M&A transactions shows that approximately 76% of such deals are terminated in failure. Thus, the integration strategy of growth has a positive effect only under the condition that company correctly carries out M&A transaction at all its stages: target selection and evaluation, settlement of the transaction, the final decision and post-merger integration phase. total cost of M&A deals declared in 2014 was nearly 3,1 trillion USD. It is the largest indicator after 2007 and 2006 when the volume of M&A transactions reached 4,62 and 3,91 trillion US dollars correspondingly. According to Bloomberg, in 2014 11 most expensive transactions which worth more than 20 billion US dollars were declared, including the purchase of cable division of Time Warner by Comcast Corporation for 45 billion US dollars and purchase of the Irish producer of medical equipment Covidien by its American competitor Medtronic for 43 billion US dollars.the experience of the leading international companies M&A deals is extremely important for the Russian business. Merges and acquisitions contribute the integration of national economy into the world one when Russian companies enter the world market. This integration has two main directions. Foreign companies buy entirely or partially Russian operating companies, introducing their capital, modern level of management and technologies. The Russian companies also use merges and acquisitions for the expansion on the foreign markets. The Russian market of M&As shows a tendency to growth within the last decade. Further growth and expansion of geography of a foreign production Network of the Russian companies can make such integration symmetric (unlike unilateral penetration of the foreign companies into the Russian economy), making it stronger and more steady in the long term.this paper we will analyze the most significant M&A deals of The Walt Disney Company and identify the effect of each transaction on each segment and of the business in a whole in terms of the increase of global competitiveness of the company. Afterwards, we will identify the most vulnerable segment and suggest companies, which Disney can acquire in order to increase its market share in this segment and thereby increase the global competitiveness of the whole conglomerate. To do this, features of global competitiveness, types of M&A deals as well as the impact of M&A deals on the companys competitiveness growth and major financial and market data of target companies will be considered.relevance of this study consists in the fact that M&A deals are becoming more and more popular as it is the strategy that is able to significantly increase global competitiveness of the company. TWDC is one of the leading companies in the entertainment market but it seeks to become the world leader and to do so it has chosen the M&A strategy. Thus, analyzing the impact of different M&A deals on the growth of global competitiveness of The Walt Disney Company will prove the fact that M&A deals play the crucial role in maximizing global competitiveness of the company. Moreover, analyzing target companies and identifying the one that will bring TWDC the most advantage will help it to move even further on the way to becoming the world leader in entertainment business.main hypothesis of this paper is that Disney Conglomerate uses the strategy of M&As successfully, which helps it to increase significantly its global competitiveness in the entertainment market.subject of the work is influence of M&A deals on the global competitiveness of the company, and the object is — M&A deals of The Walt Disney Company.
The goal of the study is identification Disneys M&A deals input in the companys global competitiveness and suggestions on making the company the world leader in entertainment market using M&A deals. Thus, the main objectives of this work are:
—Define global competitiveness and factors that ensure it;
—Consider M&A deals and their types;
—Determine motives and drawbacks of M&A deals;
—Analyze the most significant M&A deals of TWDC;
—Define how each deal influenced global competitiveness of The Walt Disney Company;
—Analyze how the deals affected each segment of the company in terms of global competitiveness;
—Identify the segment which has the least market share and is the most vulnerable one;
—Select among several target companies one, that can be acquired by TWDC;
—Prove that this M&A deal will bring the synergetic effect and increase Disneys global competitiveness;
—Make a conclusion how M&A deals influence global competitiveness and suggest to increase it by acquiring the company that can increase the market share of one of its segments;, this work aims to prove the fact that when the company has the right plan of business restructuring and follows all the steps of the deal conscientiously, mergers and acquisitions can help it to increase its global competitiveness and to reach leadership positions in the market, as it has done The Walt Disney Company. order to reach the set goals, the following sources of information will be used: Internet, periodical data, statistics, research papers of studies done on this topic, theoretical books and lectures of professor Klochko O.A..theoretical base of the research consists of the works of foreign and Russian economists in the field of mergers and acquisitions deals and also in the field of global competitiveness, such as: R. Brealey, S. Meyers, John. C. Van Horne, A. Damodaran, Michael C. Jensen, R. Roll, Y. Amihud and B. Lev, David S. Scharfstein and Jeremy C. Stein, A. Devenow and I. Welch, Dennis C. Mueller, Stephen A. Rhoades, A. Shleifer and Robert W. Vishny, M. Porter, Philip Kotler, M. Fujita (1988), Paul R. Krugman (1991), Anthony J. Venables (1996), M. Tohmo (2007), G. Ottaviano (2003) and Kern (2005).methodological basis of research is made according to the general scientific methods of descriptive, logical and comparative analysis, expert estimates methods, approaches to company valuation during the M&A deals. paper consists of three parts: Theoretical, Analytical and Practical. Theoretical part includes all the major definitions and theories that are relevant to the topic. Analytical part consists of considering the Disneys most significant M&A deals (acquisitions of Pixar, Marvel and Lucasfilm) and their influence on the companys activity and its global competitiveness. Finally, the main goal of the Practical Part of the paper was to analyze all the operating segments of TWDC, identify M&A deals influence on them and select the best company to acquire in terms of its activity, financial performance, market multiples and synergetic effect that can increase The Walt Disney Companys global competitiveness.
merger acquisition strategy market
1.Theoretical part and Metrological Basics of M&A Deals as an Instrument That Increases Global Competitiveness
1.1Factors that Ensure Companys Global Competitiveness
Competitiveness is the ability of companies to compete in international markets. It is characterized by the development, production and sale of goods and services worldwide. Competition occurs when a firm decides to maximize its profits using global sources.competition is developing under the influence of the main trends: decreasing differences between countries, the emergence of new large-scale markets, free movement of technology and aggressive competition by companies in the newly industrialized countries.which seek to increase their global competitiveness often face a number of difficulties which can substantially influence the business and can become a stumbling block for them. There are the following obstacles:
·complexity of analysis and strategy formation;
·distinction in production expenses;
·fluctuations of exchange rates;
·high expenses on transportation and warehousing;
·different needs for goods or service in the different countries;
·insufficient demand in the world market;
·fast changes in technologies;
·relationship of firm with the local governments;, despite the barriers mentioned above, every large corporation desires to become a global leader in the industry. There are many factors that affect global competitiveness of the company.interest for this issue increased since 1990s when M. Porter’s book Competitive Advantage of Nations was published. Today there is a great number of economists who consider the global competitiveness influence on the economy. The most significant researchers in this field are: Philip Kotler (1967), M. Fujita (1988), Paul R. Krugman (1991), Anthony J. Venables (1996), M. Tohmo (2007), G. Ottaviano (2003) and Kern (2005). Generalizing all the available theories, all of the factors that influence global competitiveness of the company can be combined into the following groups:
·Availability of competitive advantage;
The term competitive advantage refers to the ability gained through attributes and resources to perform at a higher level than others in the same industry or market.advantage ensures company’s success in the foreign market and it depends on the chosen competitive strategy. A choice of competitive strategy of the firm in the industry is affected by two main aspects.
. The structure of the industry in which the firm operates, i.e. features of the competition. Competition in the industry is influenced by five factors:.emergence of new competitors (barriers to entry);.appearance of substitute goods or services;.ability of suppliers to bargain;.ability of buyers to bargain;.rivalry between existing competitors.five factors determine the profitability of the industry because they influence the prices set by firms, their costs, investments and other.
.Firms position in the industry is primarily determined by its competitive advantage. The firm can become the leader if it has a stable competitive advantage:
1) lower costs, indicating the companys ability to develop and to produce and sell comparable goods at lower costs than competitors.
) product differentiation, i.e. the firm’s ability to satisfy customers needs offering either goods of higher quality or goods with the broad capabilities of after-sales service.
Competitive advantage leads to a higher productivity than competitors have. Another important factor influencing the position of the firm in the industry is the field of competition or the breadth of the objectives that guide the firm within its industry.. Porter, the founder of competitor advantage theory, distinguishes four features of the country affecting its international success of a company. However his adherents developed his theory and added two more features. The main determinants of the competitive advantage include the following conditions: factor conditions, demand conditions, strategy, structure and rivalry, existence of related and supporting industries, chance and government role. This influence can be both positive and negative.average managementquality of leadership is one of the main factors that determine its success: leaders take the most important and long-term decisions on activities, functions, and operation of the company. They affect how successful the company will conduct its activities. Directors and owners can both raise a company and ruin it.leadership that can make the company a worthy competitor in the world market should perform the following functions:
·direction of the company to achieve high economic and financial results, ensuring high quality of customer service;
·effective organization of work and interaction between structural subdivisions of the company;
·strict adherence of measures to fulfil the terms of agreements, obligations to the state budget, suppliers, customers, banks;
·introduction of progressive forms of business, the improvement of existing business forms, improvement of production technologies and equipment;
·development of the plan for economic and social development of the company;
·measures to provide the company with qualified staff, better use of knowledge and experience of employees, creation of a favorable climate in the team, safe and supportive environment for their work and etc.is a key factor that determines the success of the company. In order to perform the assigned tasks the companys head must be able to quickly find resources and to distribute them efficiently, to increase the productivity of the organization and its units as well as to interact effectively with employees, partners and senior managers. leadershipleaders usually take a consistently strong position; they have the maximum market share, above average profitability and overall fame. These companies typically provide an example to competitors while changing pricing policy, introducing new products, expanding distribution channels and increasing the intensity of the promotion activities. The main strategic goal of the leader is to maintain its position, amplify it and to occupy a dominant position in the global market. The dominant position obliges the company to be active on three fronts. First, the company needs to find ways to improve the overall demand for manufactured industry products or services performed. Secondly, it needs to protect its market segment through well-planned defensive and offensive actions. Thirdly, the leader may try to expand its market share even with the stabilization of its total volume.leadership is the factor which is most difficult to achieve because it is the result of both a competitive advantage and effective operation of the company’s management.possession of all the factors mentioned above will allow the company not only to occupy a leading position in the domestic market but also to make it a worthy competitor in the international market. However these factors do not exclude the fact that in order to achieve and increase global competitiveness the company has to develop a strategy. successfully functioning company faces the decision what development strategy to choose — strategy of organic growth or another investment strategy. The company may ensure its global competitiveness using mergers and acquisitions.and acquisitions is an instrument of competitive struggle for resources, sales markets, distribution channels, technologies and know-how. Companys competitiveness in the world market directly depends on the effectiveness of applying the external opportunities to solve the internal strategic tasks. If M&A deal is successful the company has the ability to increase its market share, have vertical and horizontal integration, benefit from services of above average management, due to attraction of new management units and get access to all the assets of the acquired company. For example, in an industry where there are high barriers to market entry mergers and acquisitions can bring significant benefits. If a buyer will make a deal with a leading company in the market with limited access, the chance to become a leader in this market will be close to the highest.&A deals have an impact on all the participants of the market competitive struggle and may lead to the significant changes in doing business in the definite segment. Such deals are very hard to introduce as they require accurate estimations and evaluations. Only approximately one third of all the transactions lead to a significant increase in the value of the company. This is largely due to an improperly built strategic plan of the company, which can lead to a number of drawbacks which include overpayment risk, underestimation of the consequences of the transaction, risk of wrong definition of the object of purchase, risk of loss of the main managers and experts, etc., today merges and acquisitions transactions are rather relevant for the business environment because of the dynamism of markets development and presence of a large number of competitors. Such competitive struggle leads to high importance of M&A deals as they allow the company to adapt promptly to changing market conditions and not to gain competitive advantages. Effective and justified M&As nowadays help the company to improve its market share and also to win the leading positions surpassing the rivals.
.2 Definition of Mergers and Acquisitions and their types
and acquisitions is a process of business capital growth focused on combining two or more companies into a single corporation with a single governing body. Merging company takes the lead of both companies on behalf of one. Thus, as a result of restructuring, a larger and more competitive company appears in the market instead of several smaller ones.&A is a form of reorganization of enterprises. Typically, companies use the strategy of mergers and acquisitions in order to increase their production capacity, to diversify, to expand and to improve the functioning of activities. The main reason of M&A deal is the fact that the larger the organization is, the easier it is to compete in the market, avoid bankruptcy, maintain profitability and ensure global leadership. In other words, two companies together are more valuable and powerful than the two separate companies.difference between the terms «merger» and «acquisition» consists in the method of the union. Merger involves pooling of resources. That means that merging companies can be considered as equal companions who decided to unite their efforts in order to increase strength of their assets, to capture larger market share, to expand consumer base and to obtain a higher profit. The main purpose of merger is to use assets of both companies and combine them in order to create a new body, the value of which is greater than the sum of the two original objects. All the shares of both companies are reissued after the merger. Mergers are usually voluntary, and shareholders of both companies retain the same interests in the new business.for acquisitions, they imply that one company buys another company, but new company is not created. Acquisition occurs through the purchase of a controlling stake (more than 50% of shares) of another company. Larger companies usually acquire smaller ones. In such cases, the company absorbs the smaller one and proclaims itself as the owner. paribus, from a legal Path to choose — reinvesting profits or purchase of another company. In general, it can be said that the deal of merger or acquisition sometimes gives more benefits than the company can get by reinvesting its profits, as it gives it the qualitative benefits such as access to new markets, the expansion of the customer base and other benefits.are certain types of M&A deals. These types are classified according to the nature of the companies’ integration, national identity of the merged companies, relation to mergers and acquisitions, method and source of financing transactions.to the nature of integration mergers and acquisitions are divided into the following types:
·Horizontal — merges in the same industry;
·Vertical — merges in different industries related by technological process of production of the finished product;
·Generic — merges of companies that produce related products;
·Conglomerate — merges in different industries that do not have common suppliers, customers or competitors.
According to the nationality of merged companies M&As are divided into two types:
·Cross-border — mergers and acquisitions of companies located in different countries;
·National — mergers and acquisitions of companies within the same state.
According to the relationship of management to the deal friendly and hostile mergers and acquisitions are distinguished.
During friendly merger (acquisition) management and shareholders of the acquired companies support this deal, and in some cases seek it. Conversely, during hostile takeover (merger) the deal takes place despite the opposition from senior staff or shareholders of the acquired company.are different methods of financing. Mergers and acquisitions can be carried out in cash, exchange of shares or both.sources include debt financing (credits, bonds, promissory notes), which are called Leveraged buyouts (LBOs). Usually, the ratio between debt and assets is 90% to 10%. Existing managers can also buy a controlling stake in the company (Managerial buyouts, MBOs). Such method is mostly often used when a company is in an economically weak position and the owners refuse to fund it further. In most cases MBOs occur due to the third parties, banks or private equity funds, because management usually does not have sufficient funds to redeem the share of their company. Management Buy-in is more likely to occur when the company is bought out by external managers, who later become the new leaders of this company.to the international consulting firm AT Kearney in 2014 there was a global M&A market downturn. The number of transactions in developed countries fell by 16% however the number of M&A transactions in developing countries grew. The developed countries with the highest number of transactions are still the United States, Great Britain and Canada. Among developing are China, Malaysia and India. As for the Russian M&A market, the number of M&A deals has not yet reached the pre-crisis level but is broadly in line with world trends, with the proviso that the Russian mergers are mostly internal transactions.
.3 Motives and drawbacks of M&A Deals
main purpose of M&A deals is to improve the financial position of the company. However, there are many theories that prove mergers and acquisitions to be not only helpful when the company wants to increase its financial benefits and global competitiveness, but also they can be completely destructive to the company. The success or failure depends on many factors, for example, the motives of mergers and acquisitions.of mergers and acquisitions are traditionally divided into three main theories:
theory of managers hubris.
The main made only under the influence of subjective decisions of the managers considering that only they know all the prospects of the company.time to time M&As are carried out with the aim to create an illusion of prosperity in the eyes of shareholders. For example, the wave of mergers and acquisitions in the U.S. banking industry in the 80s is partly explained by the desire of managers to demonstrate good performance (growth in share price, turnover and capital). Typically, in such situations, the decisions tend to be unsuccessful which finally reveals a few years after the takeover.two last theories explain motives that can lead to unsuccessful M&A deals., there are other important motives for mergers or acquisitions, which make them particularly attractive among large companies. The main motives of M&As include the following ones,:
·Growth of the company;
·Economies of scale;
·Economy of scope;
·Combining complementary resources;
·Elimination of competitors (monopoly motif);
Possible drawbacks of mergers and acquisitions include:
·possibility of incorrect determination of business attractiveness;
·high risk in case of an incorrect assessment of the company (exceeded cost of acquisition of the asset, additional investments);
·incomplete or inaccurate information on the object (wrong choice of strategy);
·increase of the cost of capital maintenance (the risk of synergy loss);
·reduction of the companys creditworthiness in response to the expansion of the business and the uncertainty of the results of post integration processes;
·difficulty of integrating the companies, especially if they are in a different, unfamiliar to each other areas (increased integration costs);
·possible problems with the staff of the bought company after the implementation of the transaction;
·differences in the qualifications of management team;
·the possibility of incompatibility of cultures of the two companies, especially in cross-border acquisitions;
·loss of customer loyalty or their outflow in post-completion period.
Despite all the disadvantages the number of M&A deals today is growing very fast. Cross-border mergers and acquisitions are very important for business development, especially if the company is striving to become a world leader. First of all, taking into consideration all the theories, motives and drawbacks of M&As the strategy of mergers and acquisitions has to be carried for the purpose of creation and receiving new opportunities (competitive advantages) which are called the synergetic effects. They help the acquiring company to be more effective, increase demand and profitability. Synergetic effects result from realization of M&A strategy in various functional fields of activity of the company: organizational, production, commercial, financial, innovative, investment, speculative and the other ones that lead to growth of the companys investment cost.
Secondly, the growth of the global competitiveness level in most business spheres force companies to integrate with each other. Thereby the company, which uses the strategy of M&A deals and gets the synergetic effects gets stronger and receives a high chance to become a market leader while increasing its global competitiveness.
2.M&A Deals of The Walt Disney Company and Their Role in Increasing the Companys Global Competitiveness
2.1 The Walt Disney Company, its Activity and Main Rivals
Walt Disney Company (TWDC, NYSE — DIS), the worlds leader of the show business industry, was founded in 1923 by Walter and Roy Disney as a small animation studio. The first and the only direction of business until 1955 of The Walt Disney Company was cinema. However, today, the company is the owner of 11 thematic parks and two aqua parks, several networks of TV and radio broadcasting studios, including American ABC. Moreover Disney is the largest publisher of children’s literature in the world. TWDC heads the list of distributors of video, DVD and Blu-ray production in Europe and Latin America. The video collection of TWDC totals in more than 3 thousand movies.company is active in 172 countries and represents 1300 radio and television channels broadcasting in 53 languages. The headquarters and the main capacities of The Walt Disney Company are concentrated in the division of the Walt Disney Studios in Burbank, California, USA.activity of The Walt Disney Company covers a large number of units and segments.Walt Disney Studios, which includes:
·Walt Disney Pictures
·Touchstone Pictures (not under the Disney brand)
·WDSSPR (Walt Disney Studios Sony Pictures Releasing)
·BVSPR (Buena Vista Sony Pictures Releasing)
Sound recording labels
·Buena Vista Music Group
·Walt Disney Records
·Lyric Street Records
·Walt Disney Theatrical
·Hyperion Theatrical (не под брендом «Disney»)
·Walt Disney Animation Studios
·Disney Television Animation
·Pixar Animation Studios
Parks and Resorts
Besides thematic parks and resorts (Walt Disney Parks and Resorts, Disneyland Resort, Walt Disney World Resort, Tokyo Disney Resort, Disneyland Paris, Euro Disney S.C.A., Hong Kong Disneyland Resort, Disney Vacation Club and Disney Cruise Line), this division includes Disney Regional Entertainment (which possesses a Network of sports restaurants ESPN Zone), Walt Disney Imagineering and Walt Disney Creative Entertainment.
Disney Consumer Products
·Disney Publishing Worldwide
·Jim Hensons Muppets
·Buena Vista Games
Media Networks, including:for children
TV and radio broadcasting networks
·Disney Television Animation
·ABC Television Network
TWDC owns a number of networks of a cable television, including Disney Channel, ABC Family, Toon Disney, a Network of ESPN and SOAPnet channels. Disney has an essential share of Lifetime Television stocks (50%), A&E Network (37.5%), E! (40%) and Jetix Europe N.V. (100%).the ABC The Walt Disney Company controls over 10 local television stations, 26 local radio stations, and also ESPN Radio and Radio Disney. Buena Vista Television prepares for air such television shows as «Who Wants to Be a Millionaire», «Live with Regis and Kelly» and «Ebert & Roeper».
·Disney Mobile apps
·Disney Social Media
·Disney Virtual Worlds
·Disney Computer Games
TWSC owns the Hyperion publishing company, Internet division of Walt Disney Internet Group (WDIG) which possesses the Go.com, Disney.com, ESPN.com, ABCNews.com and Movies.com websites.2009 the creation of new division of Disney Double Dare You was declared. The new division operates in production of horror films within the family cinema.1931 a festival of animated films took place in Moscow, and then TWDC appeared in Russia for the first time. In 2006, the Russian office of The Walt Disney Company was opened. Today, in Russia and in the CIS countries the company develops production and distribution of movies, scenic statements, release of licensed DVDs, Blu-ray and Blu-ray 3D disks, production and distribution of television content, the Disney Channel (since October, 2011), licensing of consumer goods, publishing licensing, production and distribution of digital video, games for consoles, mobile and Online games, and also develops such tourist directions such as cruises to Disney thematic parks among the Russian audience.company is in the top-15 of the most expensive brands of the world. In the 2014th fiscal year the revenue of the company was 48, 8 billion US dollars. The Walt Disney Company is included into the industrial Dow Jones index. Market capitalization in 2013 was about 122 billion US dollars. Shares of TWDC at the New York Stock Exchange (NYSE) are now (2014) traded at the price of 86, 27 US dollars.the main competitors of TWDC used to be Pixar Animation Studios, Marvel Entertainment, Lucasfilm, Twenty-First Century Fox, Sony Pictures Entertainment, Warner Brothers, Paramount Pictures, NBC, TouchStone Pictures, DreamWorks and others, however, Disney chose M&A deals as a way to eliminate its competitors and diversify its business. Today TWDCs main competitors are: Viacom Inc., Time Warner Inc., Twenty-First Century Fox, CBS, Directiv Group, Inc. and Comcast. of Pixar Animation Studios in 2006 became a high-profile case. Besides, in August, 2009 The Walt Disney Company bought Marvel Entertainment. Today TWDC possesses over 5 thousand comics characters, including Spiderman and Iron Man. In October, 2012 the company published news about the purchase of Lucasfilm together with the rights for the «Star Wars» production.a result of all the transactions the revenues increased significantly from $3, 43 billion US dollars in 2006 to $7, 5 billion US dollars in 2014. For such success The Walt Disney Company is obliged to its CEO Bob Iger who used M&A deals to solve the problem of shortage of fresh ideas and technologies.is considered that M&A deals of the companies working in the entertainment sphere rarely conduct to any changes in domestic policy. Often such companies continue to be engaged in former activity, however, they have much wider list of assets. At the same time market participants still consider that they can choose while conglomerates get advantages from a variety of their activity.
.2 Competitiveness Growth after M&A Deals of The Walt Disney Company
the major M&A deals of The Walt Disney Company were very successful. TWDC got not only higher profits due to the increased variety of services and new ideas and thereby higher demand, but also raised its chances to become a complete world leader in the entertainment market. Its global competitiveness grew significantly. Today The World Disney Company is a highly strong competitor and presents a serious threat to its rivals. So, in 2006 TWDC acquired Pixar Animation Studios, in 2009 Disney bought Marvel Entertainment, and in 2012 purchased Lucasfilm. The first two transactions have already proved the efficiency and success, considerably having increased level of income. The latter transaction is also expected to be extremely successful and to uplift The Walt Disney Company to the new level leaving all its competitors far behind.Walt Disney Company and Pixar Animation Studios was founded in 1979 by George Lucas. It was called «The Graphics Group» as a computer division of Lucasfilm. However later he decided to sell this division to Steve Jobs: he invested more than 50 million US dollars in it. Thereby Pixar Animation Studios was born.the first years of existence Pixar movies deserved recognition of Oskar Film Academy; however the company didn’t get high profits. Disney suggested investing in creation of the feature length animated Pixar film, however, the company refused. Later Pixars animated film «Toy Story» came out with huge success, and Disney understood that they had a competitor.Bob Iger became the head of TWDC, he managed to agree with Steve Jobs about the acquisition of Pixar in 2006. Pixar kept all the creative principles of its business which allowed the company to achieve success. The Disneys profits began to increase.terms of the transaction were the following: on each Pixar share Disney issued 2, 3 shares of its own. That means that one stock of Pixar was estimated by TWDC at the level of 59, 78 dollars which is 3, 8% higher than its cost at the stock exchange. In total the deal cost 7, 4 billion US dollars. a result Steve Jobs, the CEO of Pixar, became a large shareholder of Disney and one of the directors of the company. Jobs and the CEO of Disney Robert Iger emphasized that together they would do their best in order to make Pixar influence the creative atmosphere of The Walt Disney Company. The transaction was quite expected by everyone because Disney co-financed and distributed animated Pixar films, receiving part of their profits, for the last 12 years. Such projects as «Toy Story», «Finding Nemo», «Monsters, INC» and «The Incredibles» were made in cooperation of the two companies. Jobs said that he completely trusted Iger: «Most of the time that Bob and I have spent talking about this hasnt been about economics, its been about preserving the Pixar culture because we all know that thats the thing that is going to determine the success here in the long run».leading creative persons of Pixar Animation Studios got high positions in TWDC in order not to depend on the high-ranking Disney managers and to have the opportunity to offer their own fresh ideas. of the main problems of Disney consisted not only in its rather obsolete technologies but also in its stories and characters which didn’t please public as it was before. TWDC used to work in the old manner without understanding that such characters as the American Little Mermaid or the Russian Winnie-the-Pooh are impractical in computer animation. However Pixar Animation, sensitively feeling market situation, offers modern stories and mobile heroes organically performing in 3D. Despite shortage of kindness, touching, charm and romanticism Pixar characters win the hearts of the audience by their energy and simplicity. By means of Pixar potential TWDC got a real chance to become the engine of new animation.major advantage of the M&A deal is the combination of traditions and innovations. Today TWDC and Pixar Animation Studios endure the peak of their influence on the entertainment market which seems to be very stable despite the tough competition from the rivals.Walt Disney Company and Marvel Entertainment Entertainment LLC, affiliated by The Walt Disney Company since August, 2009, is known around the world due to a unique set of its fictional heroes created during the last 70 years. The Marvel library consists of more than 8 000 characters, among which are Spiderman, Iron Man, X-Men, Thor, Hulk and others. The company widely uses the characters in license business (franchise), in show business (Marvel Studios and Marvel Animation) and also in publishing projects such as Marvel Comics.history of Marvel Comics started in 1937. Since then the company was resold several times, often unsuccessfully. As a result in 1996 it declared bankruptcy, however, Isaac Perlmutter and Avi Arad, owners of toy producing company, managed to reorganize the company. They started selling the licenses for comics characters with an emphasis on movies and games. Their idea consisted in bringing superheroes of Marvel out of the limits of habitual teenage audience. As a result new beloved by everyone movies appeared such as X-Men, Spiderman and others.the same time the company continued to sell comics, having re-write old stories for the new audience. As a result their share in the market of comics grew to 50% by 2010. Marvel easily agreed on the transaction of acquisition estimated in $4 billion US dollars. The new movie «Avengers» won deafening success and brought $1,5 billion US dollars profit to the companys new owners.to the terms of the deal, each shareholder of Marvel Entertainment got 30 dollars in cash and 0,745of stocks of TWDC for each share of the sold company. As the New York Times writes, the cost of the acquisition transaction was estimated at the level of 50 US dollars per share. The total cost of the deal was 4.24 billion US dollars .the completion of the deal Ike Perlmutter, who works directly with global part of TWDC business, continued to control assets of Marvel in order to maximize integration of the Marvel Company.the Filmz.ru Portal notes, for audience this transaction means, mainly, real opportunity to see all the favorite heroes in one movie. Today the screen rights for «Spiderman» belong to Sony Entertainment, the rights for «X-Men» and «The Fantastic Four» belong to Fox Broadcasting Company. Disney expects to accumulate gradually the rights for all the Marvel heroes. Moreover the audience got a real chance to see the increased number of characters brought to the large screen.
«We believe that adding Marvel to Disneys unique portfolio of brands provides significant opportunities for long-term growth and value creation» — the CEO of The Walt Disney Company declared in the official statement. Moreover Marvel Entertainment representatives believe that TWDC will become the ideal home for the fantastic list of characters of Marvel. Besides, according to the management of Marvel, merge with the American film giant brought the company huge benefits.
«This is an unparalleled opportunity for Marvel to build upon its vibrant brand and character properties by accessing Disneys tremendous global organization and infrastructure around the world — the head of Marvel Ike Perlmutter commented on the transaction. Walt Disney Company and Lucasfilm 2011, during the preparation for opening the attraction constructed based on «Star wars» movie in Disneyland, Bob Iger met George Lucas and suggested him to buy Lucasfilm. Having remembered how Iyger managed his former company Pixar, Lucas agreed on a deal, but under the condition that there will be one more Star wars trilogy. Moreover, Lucas wanted to have the right to vote in everything connected with the usage of the brand. Iger insisted on TWDCs interest. Negotiations lasted for half a year. , according to the deal concluded on October 26, 2012 The Walt Disney Company bought Lucasfilm for 4, 05 billion US dollars. Half of this sum Disney paid in cash and the rest part — for 40 million companys shares. The media giant got Lucasfilm with all its divisions (IL&M, Skywalker Sound, etc.) and brands (primarily the Star Wars brand). The M&A deal was approved by both boards of directors and also by the only shareholder of Lucasfilm George Lucas.Kennedy was appointed the president of Lucasfilm and took the role of the brand manager and executive producer of future «Star Wars» films whereas George Lucas now acts as the creative consultant. The movie «Star Wars: Episode 7 is planned for 2015. It is expected that the «Star Wars» saga will proceed with new movies which will develop the franchise further. According to the press release on the official Star Wars Site, the work on new movies is already on the go. The correspondent of TF.N reports that new movies should be expected with an interval of 2-3 years and also there will be something for television.Lucas considers that it is high time to transfer «Star wars» to the new generation of film directors: Ive always believed that Star Wars could live beyond me, and I thought it was important to set up the transition during my lifetime. I’m confident that with Lucasfilm under the leadership of Kathleen Kennedy, and having a new home within the Disney organization, Star Wars will certainly live on and flourish for many generations to come. Disney’s reach and experience give Lucasfilm the opportunity to blaze new trails in film, television, interactive media, theme parks, live entertainment, and consumer products «.
.3 Contribution of TWDCs M&A deals to its global competitiveness
M&A deal concluded by The Walt Disney Company brought it not only higher revenues and higher demand but also some other unique benefits such as rights to use characters and themes of acquired companies, advanced technologies, new ideas and reduced competition. Thereby, TWDC increased differentiation level which brought it opportunities to branch off in areas where it hadnt previously had the capability to do so, higher significance among competitors and access to new markets both domestically and internationally. All these factors are moving the company to the new level of doing business. First of all, M&A deals helped the company to get more competitive advantages and to get more power in the market. Secondly, these transactions increased the number of admirers of TWDC and brought it even more fame than it had. to the Forbes List in 2015 The Walt Disney Company is #84 in Global 200 list, #14 in Worlds Most Valuable Brands list, #33 in Market Value list and got the 2nd place in Global 2000 list among the companies in Broadcasting and Cable Industry after the Comcast (#46).
The contribution of each M&A deal in the global competitiveness of The Walt Disney Company can be evaluated by the criteria listed in Table 1.TWDC acquired Pixar in early 2006 its market capitalization was 52.8 billion US dollars (2005). However a year after the acquisition, at the end of 2006, the market capitalization increased and was 61.02 billion US dollars.
Table 1. The Features of M&A deals that Influenced the Global Competitiveness of TWDC
DealsFeaturesMarket Capitalization (bil. USD)RevenueNet IncomeGeneral Benefits to TWDCService and Products DiversificationAudience DiversificationManagementOverall FameTWDC — Pixar (2006)61.02 (+13%)+3,5%+17,07%Advanced Technologies (3D), new ideas, mutual promotion, synergy, less competitionNew cartoons, computer games, mobile apps, merchandize -Steve Jobs (former shareholder and one of the directors of TWDC)++TWDC — Marvel (2009)34.79 (-56%)+5,03%+12,05%New ideas, characters, synergy, less competitionFeature films based on Marvel Comics in 3D, computer games, mobile apps, comics, toysboys, adultsIke Perlmutter (CEO of Marvel Entertainment)+++TWDC — Lucasfilm (2012)71 (+1%)+6,14%+7,09%Tecnologies, Acces to Lucasfilmss audio and visual producing companies (Industrial Light & Magic and Skywalker Sound )Star Wars, games, merchandize adultsGeorge Lucas (creative consultant of «Star Wars» film), Cathleen Kennedy (the president of Lucasfilm and brand manager and executive producer of the future «Star Wars»)+Afterwards in 2008 the company lost its position (-56%) mostly because of Global Financial Crisis, however, it made a decision to buy another company (Marvel Entertainment, LLC) in December, 2009. Since then its market capitalization grew nearly twice from 34,79 billion USD (2009) to 61,00 billion USD (2010). That means that the company’s size, as opposed to sales or total asset figures grew significantly. Acquiring Marvel was one of the leading factors that helped TWDC to get back and even overcome the pre-crisis market capitalization level. In October, 2012 when the company acquired Lucasfilm it managed to move forward even more: from 71 billion USD in 2012 to 94,71 billion USD in 2013 (25% growth). Today TWDC holds the first place according to its market capitalization (125,77 billion USD) in the entertainment segment. From Table 2 it can be seen that after each purchase the market share of TWDC grew except the time of Global Financial Crisis (2008-2009). The price of TWDCs shares grew four times since 2005 (from 27,85 USD as to 3 January, 2005 to 109,24 USD as to 12 May, 2015).
2. Market Capitalization of TWDC (in bil. USD), 2005-2014
YearMarket CapitalizationIncrease2005 52,80 2006 61,02 13%2007 67,26 9%2008 54,10 -24%2009 34,79 -56%2010 61,00 43%2011 70,28 13%2012 71,00 1%2013 94,71 25%2014 125,77 25%talking about the revenues, The Walt Disney Company managed to increase its total revenue by 34,56% after the first acquisition in 2006 (2005 — 31,944 million US dollars, 2014 — 48,813 million US dollars).
1. Market Capitalization of TWDC (in bil. USD), 2005-2014
largest revenue increase is seen after the Lucasfilm purchase in 2012 (6,14% growth) while the revenues growth after Pixar and Marvel acquisition were 3,05% and 5,03% correspondingly. The financial crisis in 2008-2009 badly influenced the companys revenue and net profit. So, it is difficult to estimate whether Marvel acquisition was successful in terms of revenue increase or not. However, since TWDC develops its business in different segments it faces less risk because of an economic or competitive factor that lowers the revenue for a single segment and results in more chances to expand in multiple markets. Today, after the last M&A deal TWDCs revenue continues to grow and that is why it can be assumed that mergers and acquisitions have a positive impact on the companys activity, giving it the opportunity to benefit from diversification and synergy.
3. Revenue and Net Income of TWDC (in bil. USD), 2005-2014
2. Revenue and Net Income of TWDC (in bil. USD), 2005-2014
Walt Disney Company offers a wide range of goods and services for all tastes, cultures and ages: movies, shows, themes parks, radio stations and consumer products. TWDC makes its products really differentiated within its company and from products from acquired companies. acquisition had a great impact on TWDCs diversification. One of the main inputs of Pixar Entertainment in TWDC is its technologies. Traditionally Disney used to apply hand-drawn animation which was no longer successful. However, Pixar was involved in developing digital animation technology, including 3D film production. The former, sensitively feeling the market situation, offers modern stories and mobile heroes organically performing in 3D format. Despite shortage of kindness, touching, charm and romanticism Pixar characters win the hearts of the audience by their energy and simplicity. important benefit is synergy. Pixar was always a strong competitor and merging with TWDC was advantageous to the both companies. First of all, while combining their technologies and ideas companies can achieve more success in the entertainment market. Their mutual popularity grew and finally the revenues increased. The Pixar now has the access to the Disneys production facilities and Disney can use Pixar characters in its merchandize and Disneyland parks attractions. TWDC acquired Marvel Entertainment, Robert Iger stated that Marvel has done a good job of understanding its characters and story lines. What was attractive to us about this deal was that it was about acquiring writers who know these characters and story lines well. Moreover, The Walt Disney Company got interested in Marvel not only because of the great number of potentially profitable heroes but also because Disney had practically no production focused on boys before: the company had much more princesses and beauties it in its theme parks, TV channel, cruise lines, and merchandising segments. Marvel Comics characters are now a key element in theme parks revenue. Also Marvel brands provided the company with significant long-term growth and value creation. successful acquisitions of Pixar Animation Studios and Marvel Entertainment have proven the companys ability to nurture strong brands and add their creative content to its potential and value. These acquisitions have boosted company’s growth opportunities and increased diversification even more than it used to be. With Marvel, the company can produce movies with new characters that did not belong to Disney before (Iron Man, Thor, Captain America, etc.); with Pixar, Disney can take advantage of technological innovations and creativity in the animation world, which have been helping it to improve the quality of recent animated films released by the company. Undoubtedly, these acquisitions will continue to pay off for Disney in the foreseeable future.Lucasfilm gave TWDC the first-class portfolio of content including one of the greatest family franchises «Star wars that will be combined with the unique and unsurpassed creative ideas of Disney. This transaction will provide the stable growth and considerable profit for many years.TWDC was buying Lucasfilm it set the price as 4,1 billion US dollars. The fact that the goodwill was estimated as practically half of the deal price (2,6 billion US dollars) means that Disney highly appreciates the value that will be added to the company afterwards from leveraging Lucasfilm intellectual property across TWDCs distribution channels. , Lucasfilm includes Industrial Light & Magic and Skywalker Sound, which provide visual and audio effects and other post-production services to the Company and third-party producers. The new added companys brand was included primarily in Disneys Studio Entertainment and Consumer Products segments increasing the level of diversification of products, services, audience and business in a whole.Disneys M&A deals with Pixar, Marvel and Lucasfilm gave the company great portfolios of content, new ideas, advanced technologies, audience and brought some incredibly innovative storytellers to Disney, who managed to expand the companys creativity in new directions., the acquisitions of Pixar, Marvel and Lucasfilm gave The Walt Disney Company not only higher profits and product diversification but also a skillful management team such as Steve Jobes, who was a large shareholder and one of the Directors of TWDC, Ike Perlmutter, who remained the CEO of Marvel Entertainment, George Lucas, creative consultant of «Star Wars» film and Cathleen Kennedy, the president of Lucasfilm and brand manager and executive producer of the future «Star Wars» film. All these people contributed to the new experience for The Walt Disney Company and better integration of the acquired companies., The Walt Disney Company reached high level of success by focusing on three strategic leverages that open the limitless potential of the company: creativity, innovative technology and global expansion. Since launching this strategy, The Walt Disney Company has delivered some of the worlds most extraordinary entertainment experiences as well as significant growth and a total shareholder return of 317%.
3.M&A Deal as an Instrument that Increases Disneys Global Competitiveness
3.1Influence of M&A Transactions on The Walt Disneys Companys Business Segments
year the TWDC becomes stronger in the world entertainment market. Today, the company occupies one of the leading positions in this branch. The main competitors in its various segments include such media conglomerates as Viacom Inc., Time Warner Inc., Twenty-First Century Fox, CBS, Directiv Group, Inc. and Comcast.many respects the success of The Walt Disney Company in the market is achieved due to the chosen strategy of merges and acquisitions. It is said that Pixar, Marvel, and Lucasfilm acquisitions have proven the companys unique ability to nurture strong brands and expand creative content to its fullest potential and maximum value. Thus, it is possible to draw a conclusion that M&As increased Disney’s global competitiveness both in entertainment market and in all its separate operating segments.it was already mentioned in Analytical part of the paper, the company carries out its activity in five segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive Media. Each of these segments is very important for the company and makes its business more diversified for Disney’s customers. Having considered each segment in particular, namely its contribution to TWDCs activity, we will be able to define how M&A deals affected these segments. Also it will help us to reveal the weakest segment, which can be strengthened using this type of transactions.networksNetworks stands out as the largest driver of TWDCs performance each year. Since 2005 the revenues in this segment grew 38% and the operating income increased 62%. In 2014 revenues reflected 4% growth in comparison to the previous year. All these changes were caused to a high extent due to the inclusion of Pixar, Marvel and Lucasfilm to The Walt Disney Company business.
4. Revenues and Operating Income of TWDC by Media Network Segment (in bil. USD)
YearRevenuesOperating Income200513,2072,749200614,13,48200715,0464,285200815,8574,981200916,2094,765201017,1625,132201118,7146,146201219,4366,619201320,3566,818201421,1527,321about competitors in this segment, it should be mentioned, that Media Network has the greatest number of competitors among all the TWDCs segments. They include Directiv Group, Inc. (33,1%), Viacom Inc. (9,85%), Time Warner (9,67%), CBC Corporation (8,38%) and some others that have minor market share. TWDC owns 21,74% of the market, which makes it the 2nd in Media Network segment. and Resortsand Resorts segment play a crucial role in raising strategic awareness for Disneys brands and fully engage the audience around the world.this segment TWDC has ten large competitors worldwide. The strongest among them are — Merlin Entertainments Group in United Kingdom (15%), Universal Parks and Resorts (9,6%), OCT Parks China (6,9%) and Six Flags Entertainment Corp (6,9%). However, Disneys Parks and Resorts remain the leader in this segment with 35% market share.
5. Revenues and Operating Income of TWDC by Parks and Resorts Segment (in bil. USD)
YearRevenuesOperating Income20059,0231,17820069,9251,534200710,6261,71200811,5041,897200910,6671,418201010,7611,318201111,7971,553201212,921,902201314,0872,22201415,0992,663and operating income increase from year to year (60% rise in revenues and 44% rise in operating income since 2005). The tendency is that positive mostly because of new attractions based on Pixar, Marvel and Lucasfilm stories which led to park attendance growth and higher occupied room nights at Walt Disney World Resort and Disneyland Resort. EntertainmentStudio Entertainment segment remains the main and the leading part of TWDC business though it is not that profitable as Media Network segment. It provides vivid and happy ending stories, memorable characters and remarkable worlds that make Disney one of the best-known hallmarks in the world.2013 The Walt Disney Animation Studios reclaimed its rightful place among the worlds best studios in animation, thanks to the continuing creative resurgence that began with the acquisition of Pixar. The creative lift brought by Pixar is evident not just at the Disney Animation Studios, but also at Consumer Products and at Parks & Resorts, where Disneys characters and stories can be experienced in new and innovative ways. Pixar illustrates the level of commitment to quality and creativity The Walt Disney Company strives for. Moreover, Lucasfilm results are included primarily in Studio Entertainment and Consumer Products segments.
6. Revenues and Operating Income of TWDC by Studio Entertainment Segment (in bil. USD)
YearRevenuesOperating Income20057,58720720067,52972920077,4911,20120087,3481,08620096,13617520106,70169320116,35161820125,82572220135,97966120147,2781,549it can be seen from the table, that revenues and operating income of this segment fluctuated during 2005-2014 years. However, in 2014 the Studio Entertainment Segment managed to get the highest operating income in comparison to the other years. The more beloved by everyone films are coming, the higher the profit is. Today The Walt Disney Company takes the 3rd place after Time Warner (38,08%) and Twenty-First Century Fox, Inc. (27,48%), having 18,54% of market share in this segment. Being the 3rd does not mean that the company does bad, it means that it has strong competitors and that it has to do its best in order to be the 1st. We anticipate, that at the end of 2015 after the release of a new episode of Star Wars the situation will change dramatically. The acquisition of Lucasfilm should become a special leverage for Disney, which will help it to struggle the rivals, despite the considerable gap of 8,94% in market share.
Consumer ProductsConsumer Products segment plays a vital role in the companys global growth. This segment leverages the companys high-quality content, builds powerful franchises and boosts Disneys influence in markets around the world. markets Disney, Pixar, Marvel and Lucasfilm themed products through retail stores operated under the Disney Store name and through internet sites in North America (214 stores), Western Europe (88 stores) and Japan(46 stores). For example, Marvel Publishing creates and publishes comic books and graphic novel collections of comic books in print and digital formats. Marvel Publishing also licenses the right to publish translated versions of these comic books, mostly in Europe and Latin America. by the enormous creativity of Disney, Pixar, Marvel and Lucasfilm, during 2014 Disney Stores delivered their best performance to date. Disney Consumer Products delivered revenues of nearly 4 billion USD and operating income of more than 1,3 billion USD.
7. Revenues and Operating Income of TWDC by Consumer Products Segment (in bil. USD)
This segment benefits greatly from the franchise building process, particularly in licensing. Moreover, high revenues come from the strength of merchandise thanks to Pixar, Marvel and Lucasfilm acquisitions. main competitors of TWDC in the segment are Mattel, Inc. (38.19%) and Hasbro Inc. (25,52%). Disney takes the 2nd place with 27,07% of market share. Both competitors operate only in toy producing segment. That means that Mattel and Hasbro put all their efforts in toy merchandize, whereas The Walt Disney Company has four more segments and nevertheless achieved significant results.Mediasegment is the youngest among TWDCs segments. It started its operation in 2008 after the merger of Disney Interactive Studios and the Walt Disney Internet into a single business unit which is called Disney Interactive Media Group. Disney heads believe that video gaming is a key growth opportunity over the next five to seven years as it allows extending the existing characters and brands and delivering stronger returns from the key franchises. increase in game sales and subscriptions revenue was driven by an increase of 25% from higher self-published console game revenues due to the fourth quarter release of Disney Infinity (new video game platform) and 7% due to the inclusion of Lucasfilm’s interactive games business.
8. Revenues and Operating Income of TWDC by Interactive Media Segment (in bil. USD)
YearRevenuesOperating Income2005 − − 2006 − − 2007 − − 2008719-2582009712-2952010761-2342011982-3082012845-21620131,064-8720141,299116results for the video game business fluctuate due to the timing and performance of video game releases, which are determined by several factors, including theatrical releases and cable programming broadcasts, competition, and the timing of holiday periods. Revenues from some of its Online and mobile operations are subject to similar seasonal trends.has a lot of rivals, which compete with it in production of video games and Online sites. Interactive Media segment has only 5,54% of market share today and has a great number of competitors. The strongest ones are Microsoft Corporation (13%), Sony (13%), Activision Blizzard (12%) and Electronic Arts (11%) which operate in computing and gaming hardware industry. We assume that TWDC should not seek to become a leader in this segment, but it should undoubtedly improve its positions in the market greatly., Pixar, Marvel and Lucasfilm are an outstanding collection of brands that grow stronger every day as new platforms and new markets provide enormous opportunities for high quality content and experiences.
3.2Improving the Weakest Segment of The Walt Disney Company Using M&A Strategy
‘s Interactive Media segment is the one with the lowest market share (5.54%) mostly because of being the youngest (since 2008) among Disney’s business segments and, therefore, the least developed. Moreover, there are a lot of strong competitors as this segment today is one of the fastest growing and promising ones. Every year the number of competitors is increasing due to the development of new technologies. That means that the threat of new players in the market is high. At the same time the power of suppliers is very low power because consumers have the possibility to download video games from many different resources or play Online. Also, consumers can buy consoles (Xbox, PlayStation, Nintendo Wii etc.) with games for every taste. That is why the customers’ power unlike the suppliers’ power is extremely high.strengthening its position in the video game market, Disney will not only get higher profits, but it will also increase global competitiveness of TWDC’s whole entertainment business.order to develop the segment, Disney Interactive Media Group (DIMG) should acquire more game studios in order to gain a broader understanding and experience in the video game industry. For instance, acquiring Playdom in July 2010 was a step in the right direction because of the gained experience in the casual games market added to DIMG’s gaming portfolio. TWDC bought Playdom for 763 million USD, which was №3 social game company with about 42 million monthly players at the time of the acquisition deal. s acquisition of Marvel also granted DIMG access to their wide range of characters that can attract new customers, especially among the male population., there are some investments that failed with Disney receiving minimal benefits from the acquisition. For example, a former subsidiary of TWDC, Black Rock Studio, was closed down in July 2011 after a year of functioning. The reason of the failure is inability of a firm to integrate into the core competencies of the acquirer. Two extremely different game segments were placed together and this fact caused misfit and created problems, which prohibited sustainability in the long run. The formation of separate divisions will thus be necessary for the game development, so that these entities have the autonomy to decide what is best for them. Implementing this strategy would allow different approaches to game development while still focusing revenue generation by producing blockbuster games that are popular among avid gamers. the whole, the gaming industry is changing rapidly with the emergence of social and mobile gaming. With huge corporations that have the ability to influence and change policy in a short period of time, Disney has to adapt to changes in the competitive landscape by continuing the restructure of the company via making more profitable acquisitions.examined some Disney’s M&A deals in this segment, we have identified the following criteria, which we will follow when choosing the right candidate for The Walt Disney Company to buy. The candidate company should:
-be quoted on the stock exchange market;
do its business in the USA (in order to aviod post-merger integration difficulties);
be able to provide TWDC with new technologies and experience;
give access to new market niches;
have positive growth trends (revenue, net profit, EBITDA etc.)
-have growth potential;
-provide anticipated increase in revenues;
provide anticipated increase in turnover;
provide anticipated growth of segments market share;
provide anticipated growth of stock price of the company;have selected four companies in Interactive Media segment with approximately the same market share. In our opinion after their acquisition TWDC will be able to improve its position in this segment, and, cosiquently, increase its competitiveness in the whole entertainment market. These companies are — Nintendo Co., Ltd. (8%), Electronic Arts, Inc. (11%), Activision Blizzard, Inc. (12%) and Microsoft Co. (13%). After evaluating each of them, we will choose one company that fits the best for the M&A deal with The Walt Disney Company. First of all, we will look at each of them and define the benefits that these companies can bring to TWDC. Then we will use the method of coefficients (a comparative approach), which is aimed to determine the value of the companies when compared with similar ones in the same industry. Finally, we will choose one company and anticipate the synergetic effect of the M&A transaction. We assume that the result will be positive and will bring The Walt Disney Company to an increase in global competitiveness.
. General information and benefits for TWDC of each target company Co., Ltd is a Japanese company, established in September 1889. It specializes in creating video games and game consoles. The main advantages of the company are: recognition and popularity of the brand, diversified products, innovative and easy-to-use products as well as low production costs, which allows the company to attract consumers from all the economic classes.most famous console by Nintendo are — Game Boy, Super Nintendo, Game Boy Color, Nintendo DS, Game Boy Micro, Wii, Nintendo 3DS, Wii mini and Nintendo 2DS. Among the most famous and beloved gamed produced by Nintendo are — Super Mario, Sonic, Rayman, Warms and many others.Disney acquires this company, it will be able to work in a new niche: games on game consoles. As Disney already produces games for game consoles it will be able to sell both complement products, and thus increase brand awareness and also receive additional income from the sale of these consoles.Arts, Inc. is an American corporation that distributes video games. The company was founded in May 1982 and became one of the first companies in the gaming industry. The main benefit of Electronic Arts company is the extensive content library which gives enormous power to the holder of that content. The company can demand royalty payments for any use of that content., the most successful products are sports games published under the label of EA Sports, games based on popular movie licenses, such as Harry Potter and the series of games such as Need for Speed, FIFA, Medal of Honor, The Sims, Battlefield and the later games: Burnout and a series of Command & Conquer.advantage of the Electronic Arts are its subsidiaries, which are quite large companies with a substantional weight on the video game market: BioWare, Criterion Games, EA Canada, EA Digital Illusions CE, EA Montreal, EA Tiburon, Ghost Games, PopCap Games, The Sims Studio and Visceral Games.Blizzard, Inc. — is the world’s largest interactive gaming company that successfully combines media, technology, and entertainment. It was launched after the merger of Activisation and Vivendi Games in December 2007. However, in October 2013 Activision Blizzard repurchased its own shares and got a controlling stake, while the French company Vivendi retained only 83 million units of securities (12%).most remarkable games made by Activision Bizzard are — Guitar Hero, Call of Duty, Skylanders, Destiny, World of Warcraft, StarCraft, Diablo and Hearthstone.main benefits that Activision Blizzard, Inc. will bring to the Walt Disney Company are the following: highly focused approach (strive to do a just a few things, but do them exceptionally well). Moreover, the company claims that everything they do has the potential to be a breakthrough entertainment experience. They focus on every piece of capital, talent, innovation, and energy on executing with the highest degree of excellence. The companys specialty is Online multiplayer games. In fact, six times in the past ten yaers, Activision Blizzard has created the biggest game of the year and that fact means a lot when valuing the potential acquired companies input.Corporation is one of the largest multinational companies producing software for all kinds of computers — personal computers, game consoles, PDAs, mobile phones etc.. It is the developer of the most widely used software platform — Windows operating systems. Microsoft operates its business in five segments: Windows & Windows Live Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division., the gaming unit (Entertainment and Devices Division) occupies only one-fifth of the entire company and Microsoft will definitely not sell it to Disney as this business segment is becoming more and more popular and profitable today. Therefore, we assume that despite the fact that, for example, Activision Bizzard, Electrinic Arts and Nintendo have almost the same market share, Microsoft is a huge corporation that mostly deals with software, which is not part of Disney’s interests. Our primary goal is to improve the position of Disney’s Interactive Media segment in order to improve the position of TWDC in a whole and thereby to improve its global competitiveness. Therefore, we assume that Microsoft can be excluded from the list of possible candidates for takeover by Disney.
. Financial performance of target companies this stage, in order to create a shorter list of desired companies, we will analyze financial data of these companies such as net income, revenues, assets, liabilities and others. On this basis it will be possible to define company (ies), which definitely do not meet Disney’s requirements.
9. Selected Financial Data of Activision Blizzard, Inc. (in bil. USD)
Activision Blizard20102011201220132014Revenue4,4474,7554,8564,5834,408Net Income4181,0851,1491,01835EBITDA1,0141,771,5791,6921,529Current Assets5,3855,386,2746,2416,909Non-current Assets8,0217,8977,9267,7717,837Current Liabilities2,9072,5562,6522,4052,71410. Selected Financial Data of Electronic Arts, Inc. (in bil. USD)
Electronic Arts20102011201220132014Revenue3,6543,5894,1433,7973,575Net Income-677-27676988EBITDA-494-132254409264Current Assets2,5853,0322,6092,3253,138Non-current Assets2,0611,8962,8822,7452,578Current Liabilities1,5742,0012,121,9172,39
Table 11. Selected Financial Data of Nintendo Co., Ltd. (in bil. USD)
Nintendo20102011201220132014Revenue15,47312,4247,8546,7055,587Net Income2,519951-52476-227EBITDA4,0092,179-301-251-357Current Assets17,54317,98813,83312,5810,007Non-current Assets1,8692,0292,7612,6982,758Current Liabilities4,4924,0821,8852,0521,521
According to the analysis of financial performance of Nintendo, Electronic Arts and Activision Blizzard companies, we can conclude that the financial results of all the three companies declined in 2014 compared with the previous years. However, the results of Nintendo have the largest loss since 2011. The main cause of trouble is its reorientation on the market of mobile devices. Customers using digital games only occasionally, refuse to buy specialized devices. They prefer to play games on smartphones and tablets which provide a desired game at a minimum price. This fact is reflected mainly in negative net profit and negative index of EBITDA. Moreover, Japanese law prevents foreign companies from buying out their native companies. is why we believe that the Nintendo Company is not suitable for the acquisition for Disney and may be excluded from the list of potential candidates. So now we will compare only two companies — Activision Blizzard and Electronic Arts. In order to understand which one of them will satisfy Disney’s need in the growth of its influence in the market of Interactive Media better, we have to consider market multiples, which are the main indicators in the evaluation of companies during the M&A deals.
. Comparison of market multiples of target companies order to make our assumptions more accurate, we calculate the market multiples: market capitalization/earnings (P/E), market capitalization/revenue (P/S), market capitalization/cash flow (P/CF) and market capitalization/book value (P/B). These multipliers will help us to draw conclusions about the value of the company, weather it is overvalued or undervalued by investors.
12. Valuation Ratios of Activision Blizzard, Inc.
Activision BlizardP/EP/SP/CFP/B201036,83,511,21,4201113,13151,3201210,32,48,81201318,3414,61,9201417,53,311,32Industry Avg 274,7 3,213. Valuation Ratios of Electronic Arts, Inc.
Electronic ArtsP/EP/SP/CFP/B2010 1,616,92,32011 1,8283201226,71,212,42,22013 22,881,910,73,5201418,13,513,45,4Industry Avg 274,7 3,2/E stands for Price-Earnings Ratio. It is calculated using the following formula:
high Price-to-Earnings ratio could mean that investors are expecting higher earnings growth in the future compared to companies with a lower P/E ratio. The lower value of the coefficient indicates that profits of the company are estimated at a lower price than the profit of the company with a higher coefficient.average P/E ratio is 27, Activision Blizzards ratio is 17,5 and Electronic Arts ratio is 18,1. The ratios are more or less the same and are much lower than industrys average, which means that both companies are undervalued and have a substantial potential for growth. If looking at P/E trend since 2008 we can say that AB ratio is becoming more stable and it helps us to make a conclusion that the company has a high potential but it cannot reach it. Such results can be a good motive for Disney to acquire Activision Blizzard. Talking about EA it is impossible to say, weather the company has a good trend or not. In 2010 and 2011 the company had negative net income, and companies that are losing money do not have a P/E ratio. However, 2012, 2013 and 2014 P/E ratios tend to decline. On the one hand that means that investors do not expect high earnings growth. On the other hand, the company did not reach to peak of its growth and has a potential for it. price-to-sales ratio is a valuation ratio that compares a companys stock price to its revenues. P/S is an indicator of the value placed on each dollar of a companys sales or revenues. This ratio is most relevant when it is used to compare companies in the same sector. A low ratio indicates possible undervaluation, while a ratio that is significantly above the average may suggest overvaluation of a company. It is assumed that the undervalued stock should be bought whereas the overvalued one should be sold since their market value must strive for a fair price.P/S ratio is calculated using the following formula:
with the P/E ratio it can be concluded that both companies are undervalued because their rates are lower than the industry’s average P/S ratio (4.7), giving them the opportunity to develop. However, this figure is not far behind the average, that is why we can conclude that they are not junk companies. However, on the contrary, they are quite promising and are not sold at an inflated price.P/E ratio is the ratio of stock price to earnings of the company which means that the lower the ratio is, the higher the company’s revenues are and lower the share price is. Thus, we can conclude that Activision Blizzard and Electronic Arts have an income that is high enough to improve their operations, and may be considered as suitable candidates for the acquisition by TWDC.price-to-cash-flow ratio (P/CF) is an indicator of a stocks valuation. If P/CF is very low, it means that the stock is undervalued, while a higher index means potential overvaluation. The ratio takes into consideration a stocks operating cash flow, which adds non-cash earnings such as depreciation and amortization to net income. It is especially useful for valuing stocks that have positive cash flow but are not profitable because of large non-cash charges. is calculated as following:
P/CF ratio has the same trend as P/E and P/S ratios have. Both companies have more or less the same figures. That means that Activision Blizzard (11,3) and Electronic Arts (13,4) are again equally undervalued on the market of video games.P/B ratio is usually used to compare a stock’s market value to its book value and is calculated as following:
lower P/B ratio usually means that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company. This ratio also gives some idea of whether you’re paying too much for what would be left if the company went bankrupt immediately.P/B ratio is the only indicator where the positions of Activision Blizzard and Electronic Arts diverge. Given that the average P/B ratio for the video game industry in 2014 is 3,2, Activision Blizzard has undervalued stock (P/B = 2) and Electronic Arts has overvalued stock (P/B = 5,4). , despite the fact that both companies have more or less similar figures, when analyzing financial performance and measuring market multiples, we choose Activision Blizzard for the following reasons: the main financial indicators of Activision Blizzard have more stable trend for improvement than the main financial indicators of Electronic Arts. Also, each valuation ratio for this company shows that it is a little bit undervalued compared to the market average, which not only enables it to develop further, but also makes it more attractive due to the possibility to purchase the company at cheaper stock prices, which soon may rise due to the increasing demand.
.3Advantages for The Walt Disney Company after acquisition of Activision Blizzard, Inc.
order to prove that Activision Blizzard suits to TWDC’s acquisition the best it is needed to make assumptions about the future of the main financial indicators of The Walt Disney Company after the M&A deal. Moreover, the value of the combined company has to exceed the separate values of the acquiring company and the target company on the value of the synergies. That is why we also need to calculate the synergetic effect in order to prove that the acquisition satisfies the main motive of all the M&A deals. This will help to make sure that this is the company that will help to improve the global competitiveness of The Walt Disney Company not only in the segment of Interactive Media, but also for the whole company, which is the main objective of this work.synergy is calculated using the following formula:
= Vab — (Va + Vb) — P — E,
: Vab stands for Value of the joint company after the M&A deal; Va and Vb — Values of the companies before the M&A deal; Р — acquisition premium paid to the acquired company; Е — expenses incurred during the M&A deal. are three main methods to estimate the value of the company — comparative, cost and income approaches. A universal method of an assessment of the company for acquisition is a method of discounted cash flows (income approach) which we will use to calculate the values of the companies before the deal. To calculate the value of The Walt Disney Company after the M&A deal will be used the comparative method, which consists in determination of the cost of the enterprise by comparison to similar firms and transactions.calculation the value of the company using a method of the discounted cash flow the following formula is used:
V is discounted value of the company;
·CF is Cash Flow;
·R is the average interest rate for all the sources of the company financing;
·i is time period;
·n is the last year of calculation.Flow is calculated as follows:
Investment in Fixed Assets is the difference between FA of current year and the previous one;
·Investment in Working Capital is the difference between Net Working Capital of current year and the previous one.
14. Cash Flows of TWDC, 2006-2014 (in bil. USD)
YearFACurrent AssetsCurrent LiabilitiesNet Working CapitalProfit After TaxDepreciationInvestment in FAInvestment in WCCash Flow200934.9911.898.932.963.311.74−−−201036.1811. 5511.000.553.961.841.19(2.41)7.01201135.5213.7612.091.674.811.96(0.67)1.126.31201238.5813.7112.810.895.682.073.07(0.77)5.46201341.1914.1111.702.422.214.171.1241.514.26201442.2615.1813.291.887.502.371.07(0.52)9.3215. Cash Flows of Activision Blizzard, Inc., 2006-2014 (in bil. USD)
YearFACurrent AssetsCurrent LiabilitiesNet Working CapitalProfit After TaxDepreciationInvestment in FAInvestment in WCCash Flow20090.365.332.512.820.110.63−−−20100.505.382.912.470.420.520.14(0.35)1.1520110.535.382.562.821.090.440.030.351.1420120.516.272.653.621.150.33(0.002)0.790.7020130.516.242.413.841.010.32(0.003)0.211.1220140.506.912.714.200.840.35(0.009)0.360.84discount rate represents the profitability level to which the investor would agree, making the decision on an investment in a specific project (company). The higher the level of risk is the higher the standard of profitability the investor demands. In this regard calculation of a rate of discount consists in an assessment of the risks connected with an investment of money in a concrete asset.are various methods and models of definition a discount rate of a cash flow:
model, according to capital assets evaluation (CAPM — Capital Asset Pricing Model);
method of cumulative construction;
model of the average cost of the capital (WACC — Weighted Average Cost Capital).of a discount rate according to the model of the average cost of the capital (WACC model), which we chose, is carried out using the formula:
= kd (1 — tc) wd + kp wp + ksws,
where kd — cost of attraction of the loan capital;
tc — income tax rate of the company;
wd — share of the loan capital in structure of the capital of the company;
wp — share of preference shares in structure of the capital of the company;
ws — share of common stocks in structure of the capital of the company;
kp — cost of attraction of the share capital (preference shares);
ks — cost of attraction of the share capital (common stocks)., the discount rate (R) for TWDC is 10.86% and 10.86% for Activision Blizzard Inc. the calculation of the value of the company using a method of the discounted cash flows there is a need for determination of the residual cost of business in the period following after predicted one, which is based on the prerequisite that the company is capable to bring income after termination of the last period.residual cost of the company can be calculated according to Gordon’s model:
Where — residual value of the company;
— income cash flow for the first year after the forecast (residual) period;
R — discount rate;- long-term growth rates of the company.
The Gordon’s model helps to capitalize the revenue after a forecasted period and the cost indexes by means of the coefficient of capitalization, which is calculated as a difference between a discount rate and long-term growth rates.
g(DIS) = 100 × (Total capital, fair value0 × WACC — FCFF0) ÷ (Total capital, fair value0 + FCFF0) = 100 × (59.798 × 16.51% — 5.818) ÷ (59.798 + 5.818) = 6,18%(ATVI) = 100 × (Total capital, fair value0 × WACC — FCFF0) ÷ (Total capital, fair value0 + FCFF0) = 100 × (11,557 × 11.55% — 1.078) ÷ (11.557 + 1.078) = 2.03%
Total capital, fair value0 = current fair value of companys debt and equity (bil. USD);
·FCFF0 = last year companys free cash flow to the firm (bil. USD), calculated as:
·r is marginal tax rate for the company;
·WACC = weighted average cost of companys capital.
Thus, the residual value of The Walt Disney Company in 2014 is 111.61 billion US dollars and the residual value of Activision Blizzard Inc. is 4.08 billion. US dollars., we will calculate the values of both companies using the method of the discounted cash flow:
16. Value of TWDC and Activision Blizzard, Inc. in 2014 (in bil. USD)
DISATVI201489.596.11order to calculate the anticipated value of The Walt Disney Company after the acquisition of Activision Blizzard we took three M&A deals, which, according to our ·All the deals should be comparable with Disneys deal;
·The acquiring company should be comparable to TWDC in its size, market share and revenues;
·The acquiring company should have an Interactive Media segment;
·The acquired companies should be promising video game companies with significant market share in video game industry;
·All the companies have to be traded on the stock market.the financial data was taken from the companies Financial Reports and values were calculated according the DCF method, observed previously when the values of the Walt Disney Company and Activision Blizzard, Inc. were calculated.
17. The Results of M&A Deal between Sony Corp. and Evolution Studios (in bil. USD)
Sony Corporation -Evolution Studios (2007)Before Ascuisition (2006)After Ascuisition (2008)Margin (%)Revenue63.588.728%Net Income0.942.6965%Value83.3112.8735%18. The Results of M&A Deal between TWDC and Playdom (in bil. USD)
TWDC — Playdom (2010)Before Ascuisition (2009)After Ascuisition (2011)Margin (%)Revenue36.140.912%Net Income3.314.8131%Value25.5642.3940%observing the revenues, net incomes and value of the acquiring companies before and after M&A deals (year before and year after the deal) the average margin was calculated.19. The Results of M&A Deal between Microsoft Corp. and Press Play (in bil. USD)
Microsoft Corporation — Press Play (2012)Before Ascuisition (2011)After Ascuisition (2013)Margin (%)Revenue69.9477.8510%Net Income23.1521.86-6%Value187.14193.663%20. The Average Margin in Revenue, Net Income and Value of the Acquiring Companies a Year after the Deal (%)
Average MarginRevenue20%Net Income28%Value26%, we applied this correction to The Walt Disney Company and got the anticipated value of the company after the acquisition of Activision Blizzard Inc. and calculated the synergetic effect after the acquisition, taking into consideration the anticipated premium and anticipated expenses on the deal. calculate the premium for the M&A deal we will use the premium which selected the Vivendi Games Company upon purchase of a controlling stake of Activision Blizzard in 2007. That is the current stock price of the company plus 24% . As of May 15, 2015 the price of one share of Activision Blizzard Inc. is 25.42 US dollars. Thus, if Disney wants to became the holder of a controlling stake of the acquired company (we will assume that it will be 52% of AB shares), it will pay a premium of 2,3 billion US dollars from a total cost of the transaction which according to our calculations will make 11,9 billion US dollars.
In accordance with EY Companys report, the average value of expenses on integration of business after M&A deal completion is 14% from the total cost of the deal. That is why we assume that integration expenses will be 1.67 billion US dollars.
21. Synergetic Effect for TWDC after M&A Deal with Activision Blizzard (in bil. USD)
TWDC (2014)Activision Blizzard (2014)TWDC + Activision BlizzardTWDC + Activision Blizzard (M&A)PremiumExpensesSynergyRevenue48.814.4153.2258.58Net Income13.01835848.0116.65Value89.596.1195.70112.882.31.6725.43all the calculations the estimated revenue will make 58.58 billion US dollars, 17% greater than the revenue in 2014, and the anticipated net income will compose 16.65 billion US dollars, which is 22% more than in 2014. The synergetic effect turned out to be 25.43 billion US dollars, which is a very good result. Thus, we proved that Activision Blizzard Inc. suits for TWDCs acquisition and is able to increase the global competitiveness of The Walt Disney Company in the entertainment market. to the nature of integration this M&A deal will be considered as horizontal, according to the nationality of merged companies it will be a national deal and according to the relationship between management the deal will be a friendly one.sum up, we are quite sure that the M&A deal between The Walt Disney Company and Activision Blizzard Inc. will bring not only economic benefits to Disney such as income growth, but also will give it new technologies, experience and increase its share in the video game market. Having increased its share in this market, TWDC will be able to increase the influence in the whole entertainment market and respectively will manage to increase its global competitiveness. Thus, The Walt Disney Company will become an even stronger player in the entertainment market, having overtaken its main competitors.
there has been a significant increase in number and volumes of mergers and acquisitions transactions in the whole world including Russia. Integration processes change structurally, high number of regions is involved in them, and scales of international transactions extend. For business community these processes have clear logic as they assume obvious economic motivation: expansion of sales markets, production synergy, financial benefits, which are factors conducting to increase in cost of equity and increase in influence of the company in the market in which it functions., not all the M&A deals are successful and bring benefits to the acquiring company, there is a number of deals that prove that if a company uses correct and rational evaluation of future transaction, namely valuation of the target company and future economic benefits, M&A deal can considerably improve the competitive position of the company as, for example, it was made by The Walt Disney Company.competitiveness is the ability of companies to compete in international markets and M&A deals are a good instrument that is able to improve its position in the market where the company functions and to overcome its global competitors. Using the example of The Walt Disney Company we proved that availability of competitive advantage, above-average management and market leadership plus properly prepared and implemented M&A deal may result in the increase of companys global competitiveness and its influence in the market.had three high-profile M&A deals and each of them was extremely successful and brought a number of significant advantages to the company. Moreover, these deals helped Disney to increase its global competitiveness and increase its market share in each segment the company operates in. Apart from positive economic results, such as revenue, profit and share price growth, The Walt Disney Company managed to diversify its business, attracted new audience, got new skilled managers and increased its influence in the entertainment market. However, today Disney is not the unambiguous leader in four of five segments in which it operates. We suggested improving the weakest and newest segment, Interactive Media, which in our opinion can play an important role in successful activity of the company and will be able to increase its global competitiveness considerably. This segment does not occupy even the tithe of the Interactive Media market but it is very perspective because of general addiction to video games both Online and on game consoles and phones.is important to notice that the main competitors of The Walt Disney Company, Viacom, Time Warner Inc., Twenty-First Century Fox, CBS, Directiv Group, Inc. and Comcast, also have quite poorly developed Interactive Media segment. Therefore if Disney starts acting now and will redeem the main companies that produce video games, it won’t leave any chance to its competitors and will be able to compete with the companies for which this activity is the main one.proved that Activision Blizzard Inc. suits well for M&A transaction with Disney as it is capable to bring significant benefits to the company such as synergetic effect, which is the most important motive when a company choses M&As as a method of integration. The synergy is a result, which each company seeks to reach in order to enter the world market and to take the leading positions in it. So, having estimated the synergy, we made a conclusion that this effect is possible to be obtained and it is quite big. Also, using the identical transactions in this branch, we estimated that in a year the revenue of the company has to grow by 20%, the net income has to increase by 28% and the value of The Walt Disney Company has to extend by 26%.main strength of Activision Blizzard Inc. is that the company is very influential in its segment of the world market and in each region. Activision Blizzards positions are very strong in the Asian countries where Starcraft and World of Warcraft games became super — hits. Moreover, AB creates console games for Microsoft Xbox 360, Sony PlayStation 3 and Nintendo Wii, which are traditionally popular in Europe and the USA., the hypothesis of this paper (Disney Conglomerate uses the strategy of M&As successfully, which helps it to increase significantly its global competitiveness in the entertainment market) is approved. The main goal, which is identification of Disneys M&A deals input in the companys global competitiveness and making suggestions on making the company the world leader in entertainment market using M&A deals, is reached. Walt Disney Company has to continue to win the entertainment market using mergers and acquisitions transactions and then it will increase its global competitiveness even more and will get the real chance to become the leader in each segment of its activity.
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