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It operates in 4 business units

The Walt Disney
Company, founded in
1923, is an American Media Networks
Media Conglomerate. Studio Entertainment
Broadcast, cable, radio and
Film, music recording label, and
publishing and digital
theatrical divisions
businesses

The company
established itself as a Direct-to-consumer & Parks, Experiences & Products
leader in the American International Theme parks, cruise line, travel-
animation industry Digital subscription streaming related assets, consumer
before diversifying into services and international products and publishing
live-action film holdings divisions
production, television,
and theme parks.
 Corporate Strategy

Disney

Studio Direct-to-consumer & Parks, Experiences &

Media Networks
Entertainment International Products

All are Related Businesses

All of Disney’s businesses are related business units which provide revenue synergies. Every business unit in Disney promotes everything else.

The Studio Entertainment Division creates and produces the content, which is then broadcasted by the Media Networks Division and streamed across the globe by the
Direct-to-consumer & International Division. Further, the same content is further promoted by the Parks, Experiences & Products Division through selling consumer
products using that content or having rides/characters in their theme parks.
 Assumptions 
Proposed acquisition year Sales Growth Rate COGS: 70% of sales
2020 2021 Free cash flows used Constant till 2019 SG&A: 15% of sales
for calculating terminal value
Terminal valuation year in 2020 Calculated at CAGR Depreciation: 6% of sales 
2020  Post 2019 (Conservative Estimates)

COGS: Movie exhibition cost Tax value used as per the

SG&A: Finance cost + Other Deductions: Exception
+ Other expenses Income Statement till 2019.
Employee Benefit Cost Items + Taxes  
(operations) + F&B costs Post that, average tax = 37%

Terminal Growth Rate: 5% to

WACC for both Disney and be fair to both PVR and
Cash and Long-Term Debt: as Total Outstanding Shares: as
PVR Groups Disney (PVR bought SPI
per Balance sheet ending per Financial Report ending
Cinemas with terminal
8% March 2019 March 2019
growth rate between 5% &
10%) 

Transaction Fees
5%
A Standard of the
enterprise value
 Synergies
Customization

Disney + PVR • In India, revenue share of theatricals is 65-70% whereas globally it is 20-35%. So an Indian
acquisition will be more beneficial compared to that in any other country.
Customization & • PVR is spending heavily on technology and digital integration. For eg: iMax, 4DS, Gold Class,
Playhouse, mainstream screens, Asia's first Virtual Reality (VR) Lounge. This will add to
Connect Disney’s customer engagement.
• PVR Playhouse can be used to create special Disney themed experiences for special
occasions such as birthday parties.

Connect Combine

BU with highest • PVR has 821 Screens at 172 Properties in

70 Cities (India and Sri Lanka), serving
• Disney can use PVR property and reach
to advertise its new entertainment
synergy 100 million patrons annually. It is the
highest footfall. Acquiring PVR will give
content.
• Reduction of screening cost in India.
Disney access to the largest movie
Media Networks market and one of the largest customer
base in the world.
 Valuation with Synergies -
Assumptions
Cost Synergy

The share of Hollywood in the overall box office

pie: 13% Revenue Synergy

Share of Disney & 21st Century Fox in Hollywood
movies produced: 35% (assumed the same share
in India)
% reduction in exhibition cost = 35% x 13% =
4.55%
Profit as a percentage of sales from
VKAAO platform in 2018: doubled up
to account for additional revenues
from Disney's synergies. This is taken
as 0.1% of net sales post 2019.
 Valuation with Synergies:
Results
• PVR share price, taking cost synergies into account i.e. exhibition cost savings.
• 23.55% increase
Rs 1516

• PVR share price, taking revenue synergies into account i.e. additional revenue from
VKAAO.COM.
Rs 1250 • 1.87% increase

• PVR share price, taking total synergies into account.

• 25.38% increase
Rs 1539
 Sensitivity analysis
Terminal Value 3% 7%
Standalone valuation Rs 694 Rs 3894
Valuation with
synergies Rs 890 Rs 4785

• PVR share price, taking cost synergies into account i.e.

exhibition cost savings.
Rs 1516 • 23.55% increase

• PVR share price, taking revenue synergies into account i.e.

additional revenue from VKAAO.COM.
Rs 1250 • 1.87% increase

Valuation is more sensitive to cost synergies than revenue synergies.

 Challenges in Acquisition

PVR is amongst the top 10 global multiplex chain operators in terms of number of admits (Source: CRISIL).
However, in terms of Spend Per Head (SPH) and Average Ticket Price (ATP), it is significantly lower than that of its
global peers, indicating significant headroom for Box Office and F&B revenue growth. This may lead to a lower
valuation.

For Disney it is a vertical integration and entry into a new distribution channel. It will require close collaboration
between production house and PVR to create the required experience. Cultural differences between the parties
can be a roadblock in future.

Online streaming is the future of content consumption. Share of theatricals is declining y-o-y. In the developed
markets they contribute 25-35% of gross revenues. In India though it is 65-70% but will decline in future. So
acquiring PVR at this stage may be a questionable bet.

PVR may lose its autonomy of screening movies and may have to push less popular Disney movies which may eat
up its revenues from mainstream shows.
 Solutions
Clearly demarcate the roles and responsibilities of each stakeholder, the level
of interactions needed and corporate hierarchy.

The intent of working together should be gauged beforehand.

Level of autonomy with PVR for screening movies and shows should be
clearly decided beforehand.

Dispute redressal mechanisms should be clearly chalked out.

The organizations need to see this more as a strategic alliance compared to

as a full fledged acquisition.
THANK YOU!
Name PGID

Group: A4

Pranit Sarmalkar 61920409

Prateek Agrawal 61920893

Ritu Raj 61920438

Nimisha Sainani 61920393

Sneh Jain 61920470

Prasanna Krishna Duvvuri 61920521

 References
• https://www.livemint.com/Consumer/4WVKelwCYi26fethmPEMnN/PVR-adopts-customer-segmentation-strategy-to-bo
ost-footfall.html
• https://www.statista.com/statistics/187299/box-office-market-share-of-20th-century-fox-in-america-since-2000/
• https://qz.com/1771003/2019-was-disneys-biggest-year-ever-2020-will-be-its-most-important/
• http://panmore.com/disney-generic-competitive-strategy-intensive-growth-strategies
• https://www.statista.com/statistics/193140/revenue-of-the-walt-disney-company-by-operating-segment/
• https://www.indiaretailing.com/2018/08/02/shopping-centre/a-lot-of-tech-goes-into-building-pvr-getting-it-mall-ready-
gautam-dutta-ceo-pvr-cinemas/