Pixar

From a section of Lucasfilm's computer division in 1979 to one of animation's biggest names
today, Pixar has come a long way. Its reputation for producing films with a mesmerising
vision and fierce originality is cemented by critical and commercial successes like Wall-E and
the Toy Story series. 

Since Pixar started as an independent company in 1986, the studio has evolved continually,
but its acquisition by Disney was a pivotal moment in its history. The ground-breaking deal
that Pixar signed 15 years ago today helped shape the future of the company.

Disney had a long-standing partnership with Pixar, dating back to when Steve Jobs joined the
company as chairman. After buying Pixar's custom animation software, Disney even signed a
landmark $26 million deal with Pixar to produce three computer-animated films. This allowed Disney
to market and distribute the Pixar films. Pixar's impeccable track record made such an agreement
profitable for both companies, especially for Disney. It was Pixar that produced some of the most
iconic animated features of the last decade before it merged in 2006 with Disney. The success of Toy
Story, Monsters, Inc., and Finding Nemo made them instantly recognizable as critical and
commercial successes. After the phenomenal success of Toy Story (1995), Disney and Pixar
negotiated a ten-year, five-picture collaboration, but the two companies were at conflict since the
creation of Toy Story 2 (1999) over the terms of their deal, especially the method of release. Pixar
even considered finding a new distributor at one point, but everything changed when Bob Iger took
over as CEO of Disney in 2005. Iger understood that the famous studio "needed a huge
improvement," and believed that acquiring Pixar was the quickest way to do so: "I thought the
fastest way to accomplish that, albeit at the riskiest and most expensive price, was to buy Pixar."

The vertical merger between Walt Disney

and Pixar
During a vertical merger, two or more companies work together to
manufacture a specific finished product at different stages of the production
process. This usually takes place so that there can be an increase in
synergies created by the merging of companies. Vertical merging can be
cost-efficient, increase profits, helps in diversification, and expand the
market.

And when it comes to the merger of Walt Disney and Pixar it was a vertical
merger because Pixar has specialization in animation. Disney’s focus is on
creating animated movies. Both companies were in the same field and were
operating at different stages of production. Their synergy has resulted in the
production of smashing hits worldwide.

The merger of Disney and Pixar was made on two alliances:

 1. Disney and Pixar will need to work on maximizing profits by
marketing their products together.
2.  Investment Alliance: in this arrangement, both companies invest in
animation pictures and share 50% of the profit from them.

What were the reasons for merging?

 Disney by acquiring Pixar was getting the pool of talent in both

creative and technical terms. This was going to be a very valuable
asset for Disney. The combined efforts and resources of Disney-
Pixar can produce more movies in a year resulting in value addition
for Disney.

 The idea of acquiring Pixar could have helped Disney in content

creation with advice from experts at Disney for distribution. This
would have resulted in maximizing revenue amounts for both
domains.

 For Pixar, this deal will be beneficial in terms of gaining monetary

support from Disney. 
 Disney's acquisition of Pixar would give Pixar an advantage in the
market over rivals such as Lucasfilm, DreamWorks, Universal, etc.
With Disney's animation experience and theme parks, Pixar would
be able to compete with rivals. In turn, it would help Pixar to
increase its private equity ratio. Additionally, Apple iTunes benefited
from the acquisition.

Why was it a successful Merger

Corporate Culture of Pixar remained intact

In this contract, Iger was willing to accept Pixar's laid-back atmosphere. In most mergers, the dominant force
emerges, but Disney accepted Pixar's t-shirt and blue jeans attitude as its strength. Disney accepted Pixar's old
employment agreement and did not force its employees to sign a new one. Disney made a long list of
promises. After a year, Pixar executives reviewed the list of promises and discovered that every promise had
been kept. This reaffirmed the trust, and Pixar became more at ease doing things the Disney way.

The agreement between Disney and Pixar permitted Pixar employees to keep their previous email addresses. It
did not diminish Pixar's advantages. Pixar's image was not compromised. In exchange, Disney encouraged Pixar
to make more than one film per year.
Perfect Blend of Corporate Culture
Certain aspects of a change in the management process must be correct to take full
advantage of the merger of two companies' corporate cultures. And Disney and Pixar
accomplished this without a hitch:

 Both companies were able to highlight their values.

 The approach towards the merger was constructive, with Disney as
it employed the talent of Pixar.
 Disney accepted the employment conditions of Pixar, which helped
the talented people stayed.
 The communication between the executive teams from both sides
was effective.