About 10 years in the past, I invented a rule about masking mergers and acquisitions that also hasn’t failed me.
Here it’s: Will Apple purchase [insert company of your choice here]? –> No.
Apple virtually by no means buys name-brand firms. Its largest takeover was 2014’s $3 billion deal for Beats Electronics. Apple is strict about its tradition and its focus. While Microsoft has acquired its approach to elevated scale — shopping for Activision Blizzard for $69 billion, LinkedIn for $26 billion, Nuance Communications for $20 billion, and 5 different firms for greater than $5 billion — M&A is not in Apple’s DNA.
Read extra: Iger, Chapek and the making of Disney’s succession mess
For years, analysts and reporters have speculated Apple may need to purchase Disney, an organization with a market valuation of almost $150 billion. The ties between the 2 firms are traditionally sturdy. Apple co-founder Steve Jobs turned 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 Executive Bob Iger.
Apple’s market capitalization is close to $3 trillion. Buying Disney would not even classify as a bet-the-company transaction.
In his 2019 autobiography, “The Ride of a Lifetime,” Iger acknowledged he believes Disney and Apple might have merged if Jobs, who handed away in 2011, had lived longer.
“I believe that if Steve were still alive, we would have combined our companies, or at least discussed the possibility very seriously,” Iger wrote.
Since his return as CEO in November, Iger has saved Disney’s reference to Jobs alive. A couple of months in the past, many Disney staff got here to their places of work to seek out copies of a e-book, “Make Something Wonderful: Steve Jobs in His Own Words,” on their desks. Iger despatched an electronic mail to all Disney staff touting the e-book, describing it as “another tool from Steve — a resource for you, the reader, to spark the creativity that lives inside all of us.”
Selling Disney to Apple could possibly be a storybook ending for Iger, who might argue the easiest way to transition Disney into a contemporary media firm is to pair up with probably the most profitable know-how firm in historical past. Disney’s family-friendly model could also be a match with Apple, which appeals to shoppers all over the world.
Still, it is not clear Apple would have any curiosity in shopping for Disney. Beyond its therapy of M&A as anathema, Apple has no core competency operating theme parks or promoting the sorts of shopper merchandise Disney gives. It virtually definitely would not need to be within the dying cable tv enterprise.
While 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 units that they are basically 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 might assist with Apple gadget churn whereas rising subscription income.
On the opposite, if Apple needs 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 at present loses cash, will not be its deal of selection.
Apple might purchase Disney to make content for its augmented reality headset, probably the corporate’s subsequent main development division, however that is in all probability not sufficient of a motive to make an acquisition.
Regulatory and tradition points
Even if Apple CEO Tim Cook fell in love with the notion of proudly owning Disney and its related perks (free Disney World rides for Apple staff! Content synergies for gadget house owners!), it is ambiguous at finest, and unlikely at worst, whether or not regulators would enable a deal to proceed.
With Lina Khan operating the Federal Trade Commission, which has tried to crack down on large tech acquisitions beneath her watch, the probabilities of the U.S. authorities permitting Apple to extend its dominance over the worldwide economic system appear minute. Perhaps Apple and Disney might sue to win approval — the companies haven’t got a lot overlap — however the course of can be time-consuming and messy, bringing unneeded uncertainty to each firms.
For the sake of argument, as an instance Apple does need to purchase Disney. Let’s say Disney divests or sells its legacy cable property, ridding itself of no-growth companies that may weigh on Apple’s earnings. Let’s even say the regulatory setting adjustments so the U.S. authorities can 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 power of Disney’s present tradition and showcased how altering worker attitudes and expectations is not simple — even for somebody who had spent three a long time on the firm. Merging the 2 distinct, well-established cultures looks like a possible recipe for catastrophe.
The overwhelming proof on massive 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, might Apple in the future purchase Disney? Sure. But I’m in no rush to change my M&A cardinal rule.