Apple buying Disney is unlikely

About 10 years in the past, I invented a rule about overlaying mergers and acquisitions that also hasn’t failed me.

Here it is: 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. While Microsoft has acquired its method to elevated scale — buying 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.

Read 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 almost $150 billion. The ties between the 2 corporations are traditionally robust. 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 could have merged if Jobs, who handed away in 2011, had lived longer.

“I consider that if Steve had been nonetheless alive, we’d have mixed our corporations, or not less than mentioned the likelihood very severely,” Iger wrote.

Since his return as CEO in November, Iger has stored Disney’s reference to Jobs alive. Just a few months in the past, many Disney staff got here to their workplaces to search 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 “one other instrument from Steve — a useful 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 one of the best ways to transition Disney into a contemporary media firm is to pair up with essentially the most profitable know-how firm in historical past. Disney’s family-friendly model could also be a match with Apple, which appeals to customers all over the world.

Still, it is not clear Apple would have any curiosity in buying Disney. Beyond its therapy of M&A as anathema, Apple has no core competency working theme parks or promoting the sorts of shopper merchandise Disney presents. It nearly actually 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 gadgets that they are basically non-material to the corporate. Apple hasn’t bothered to inform buyers the variety of Apple TV+ subscribers.

On one hand, buying Disney would supercharge these fledging companies, which might 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 might purchase Disney to make content for its augmented reality headset, probably the corporate’s subsequent main progress division, however that is most likely not sufficient of a cause to make an acquisition.

With Lina Khan working the Federal Trade Commission, which has tried to crack down on big tech acquisitions beneath her watch, the possibilities 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 do not have 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 instance Apple does need to purchase Disney. Let’s say Disney divests or sells its legacy cable belongings, ridding itself of no-growth companies that might 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 era at Disney illustrated the power of Disney’s present tradition and showcased how altering worker attitudes and expectations is not straightforward — 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 massive media mergers — AOL buying Time Warner, AT&T buying Time Warner, CBS and Viacom merging, Discovery and WarnerMedia merging — is immense worth destruction.

So, might Apple someday purchase Disney? Sure. But I’m in no rush to change my M&A cardinal rule.