About 10 years in the past, I invented a rule about protecting mergers and acquisitions that also hasn’t failed me.
Right here it’s: Will Apple purchase [insert company of your choice here]? –> No.
Apple nearly by no means buys name-brand corporations. Its largest takeover was 2014’s $3 billion deal for Beats Electronics. Apple is strict about its tradition and its focus. Whereas Microsoft has acquired its method to elevated scale — shopping for Activision Blizzard for $69 billion, LinkedIn for $26 billion, Nuance Communications for $20 billion, and 5 different corporations for greater than $5 billion — M&A is not in Apple’s DNA.
Learn extra: Iger, Chapek and the making of Disney’s succession mess
For years, analysts and reporters have speculated Apple would possibly need to purchase Disney, an organization with a market valuation of practically $150 billion. The ties between the 2 corporations are traditionally sturdy. Apple co-founder Steve Jobs grew to become Disney’s largest particular person shareholder after Disney acquired Pixar, then owned by Jobs, for $7.4 billion in 2006. The deal additionally gave Jobs a seat on the Disney board and fostered a detailed friendship between Jobs and Disney Chief Government Bob Iger.
Apple’s market capitalization is close to $3 trillion. Shopping for Disney would not even classify as a bet-the-company transaction.
In his 2019 autobiography, “The Experience of a Lifetime,” Iger acknowledged he believes Disney and Apple could have merged if Jobs, who handed away in 2011, had lived longer.
“I imagine that if Steve had been nonetheless alive, we’d have mixed our corporations, or no less than mentioned the chance very significantly,” Iger wrote.
Since his return as CEO in November, Iger has saved Disney’s reference to Jobs alive. A number of months in the past, many Disney staff got here to their workplaces to search out copies of a guide, “Make One thing Fantastic: Steve Jobs in His Personal Phrases,” on their desks. Iger despatched an electronic mail to all Disney staff touting the guide, describing it as “one other software from Steve — a useful resource for you, the reader, to spark the creativity that lives inside all of us.”
Promoting Disney to Apple may very well be a storybook ending for Iger, who may argue one of the simplest ways to transition Disney into a contemporary media firm is to pair up with essentially the most profitable expertise firm in historical past. Disney’s family-friendly model could also be a match with Apple, which appeals to customers world wide.
Nonetheless, it is not clear Apple would have any curiosity in shopping for Disney. Past its therapy of M&A as anathema, Apple has no core competency operating theme parks or promoting the sorts of client merchandise Disney affords. It nearly definitely would not need to be within the dying cable tv enterprise.
Whereas Apple has dabbled in proudly owning sports activities rights and creating scripted content material for Apple TV+, the companies are so small relative to creating and promoting gadgets that they are primarily non-material to the corporate. Apple hasn’t bothered to inform traders the variety of Apple TV+ subscribers.
On one hand, shopping for Disney would supercharge these fledging companies, which may assist with Apple machine churn whereas rising subscription income.
On the opposite, if Apple desires to spend greater than $100 billion on an acquisition, getting an ESPN enterprise with shrinking subscribers and a content material enterprise centered round streaming, which presently loses cash, will not be its deal of selection.
Apple may purchase Disney to make content for its augmented reality headset, doubtlessly the corporate’s subsequent main progress division, however that is in all probability not sufficient of a cause to make an acquisition.
Regulatory and tradition points
Even when Apple CEO Tim Prepare dinner fell in love with the notion of proudly owning Disney and its related perks (free Disney World rides for Apple staff! Content material synergies for machine homeowners!), it is ambiguous at greatest, and unlikely at worst, whether or not regulators would enable a deal to proceed.
With Lina Khan operating the Federal Commerce Fee, which has tried to crack down on massive tech acquisitions beneath her watch, the probabilities of the U.S. authorities permitting Apple to extend its dominance over the worldwide financial system appear minute. Maybe Apple and Disney may sue to win approval — the companies haven’t got a lot overlap — however the course of could be time-consuming and messy, bringing unneeded uncertainty to each corporations.
For the sake of argument, as an example Apple does need to purchase Disney. For example Disney divests or sells its legacy cable property, ridding itself of no-growth companies that will weigh on Apple’s earnings. Let’s even say the regulatory setting modifications so the U.S. authorities could be extra amenable to a deal.
An settlement would imply Disney’s company tradition must mix with Apple’s tradition. The Bob Chapek period at Disney illustrated the energy of Disney’s current tradition and showcased how altering worker attitudes and expectations is not simple — even for somebody who had spent three many years on the firm. Merging the 2 distinct, well-established cultures looks like a possible recipe for catastrophe.
The overwhelming proof on giant media mergers — AOL shopping for Time Warner, AT&T shopping for Time Warner, CBS and Viacom merging, Discovery and WarnerMedia merging — is immense worth destruction.
So, may Apple someday purchase Disney? Positive. However I am in no rush to change my M&A cardinal rule.
