We are all aware of the great commercial success the latest Star Wars film, ‘The Force Awakens’ has achieved. The beneficiary of this success is The Walt Disney Company who paid US$4.1bn to Lucas Films in 2012 for the franchise.
Most acquisitions fail, but this is a resounding success. The Lucas Films acquisition was the third major acquisition by Disney’s Bob Iger who took over the helm in 2005 – the other two were Pixar Animation and Marvel Entertainment. Disney forked out around US$24bn on these acquisitions. So Mickey Mouse and The cast of Muppets now have Luke Skywalker, Buzz Lightyear and Iron Man of The Avengers alongside them and many more. The enterprise value of Disney has grown from around US$30bn to US$187bn in this decade together with profits doubling to nearly US$9bn last year.
These additions to the Disney ‘family’ must therefore rank as great acquisitions. So what are the key components that have made these acquisitions so successful?
-Talent acquisition - when Disney acquired Pixar, they acquired, if only on a part-time basis, Steve Jobs. Steve Jobs not only helped with the Pixar integration but was a key factor in persuading George Lucas to sell Lucas Films.
-New technology - Disney had been left behind by the shift to digital – its acquisition of Pixar addressed this skill gap.
-New techniques - Industrial Light and Magic came along with Lucas Films – the best special effects house in the business.
-Opportunity to enhance existing revenues. Disney is the world’s market leader in terms of Licensing and Entertainment revenues. Its merchandising revenue in 2014 was US$42.5bn. Disney has and will cross sell the film franchises into theme park attractions, merchandising, music publishing, television, books, graphic novels, video games and so on. It employs armies of people to promote its brands. The acquisitions over the past decade have given their departments more products to work on.
-Post integration planning. There are five more Star Wars films mapped out (although fans may be a tad disappointed at today's announcement they will have to wait until December 2017 for Episode VIII) through to mid the 2020s alongside sequels for its other franchises. Before you make an acquisition, you must know and plan what you are going to do with it.
-Recognise changing markets. To date one half of Disney’s profits have come from cable TV - primarily ESPN – which was another acquisition. However, the viewing market is fast changing - television and cable TV is in decline. The public still wants to view products - but on streaming services. The demand for content is greater than ever – Disney has hugely enhanced its library.
And finally - I read with interest that Bob Iger has a list of companies that would potentially make good acquisitions for Disney. Any business owner that wants to grow or hold onto market share, must be looking at the horizon and not focusing all their efforts on micro-managing the day-to-day detail.