M&As and the Perceived Requirement to Integrate Swiftly

As a MBA you more than likely take one or more strategy classes that address the various aspects of mergers and acquisitions and the logic behind such deals. More than likely, you learn to recite synergy, synergy, synergy. I know I did and that's why I found this article especially interesting.

Of course, we did hear about the many failed M&A deals in the past, but their failure was always accounted for by the lack of synergies, or more generally, other incompatibilities between the two joining companies. This brief case study of the success of Disney's acquisition of Pixar never uses the term synergy - not even once. Instead, it actually goes-on to speak of the importance of communication between company management teams as well as throughout the ranks of employees on both sides of the deal.

Bob Iger, the successor to Michael Eisner, was credited for the success of the deal along with Steve Jobs and summarizes his point of view on M&A deals as follows:

“There is an assumption in the corporate world that you need to integrate swiftly,” Mr. Iger told The Times. “My philosophy is exactly the opposite. You need to be respectful and patient.”

Respectful and patient is exactly what both Disney and Pixar teams were. The letterheads didn't change, nor did the signs on the front of Pixar's buildings. The employee benefit plans didn't change at Pixar and neither were the two companies' email systems integrated. Such tactics, usually taken within weeks, if not days, of the signing of a deal were never done. Instead, the management teams at both companies looked to learn from each other and strengthen each others' businesses.

Pixar has benefited from Disney's marketing and distribution strength while Disney has most notably benefited from the technological strength of Pixar in using computer-generated animation techniques in the latest blockbuster films released since the deal. So much so that while most such deal see the combined value of the companies fall, Disney's stock has grown by as much as 28% in the past year alone. This result is not only interesting for as an exemplar of what a successful deal looks like, but also how it challenges the popular consensus still taught in business schools. I, for one, will be looking closely at the relationship between management teams of a possible deal when making a decision whether or not to invest in the combined entity.