Negotiation:
The Walt Disney
Company Acquires
Marvel Entertainment,
Inc.
MGT 4183-Negotiations
Professor Valcea
Patrick J. Flynn
Luke D. Gastgeb
Hank W. Latimer
Josh G. Myer
Brian A. Shelton
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Table of Contents:
I) Introduction….............................................................................
pg.3
i) The Merger
II) Background
Information…...........................................................pg.4
a) Disney
i) History
b) Marvel
IV) Conclusion/Summary…................................................................
pg.
I. Introduction
In a landmark acquisition, The Walt Disney Corporation took just seven months to
reach concessions in their negotiation with Marvel regarding a merger, dating back to
their initial discussions on February 18th, 2009. On that day, a typical business meeting
between Marvel’s Chairman David Maisel, and Disney President Robert Iger transcended
into a recognition of the vast strategic advantages that each company could offer the
other. On August 28, 2009, the two giants came to an agreement. Disney agreed to pay
Marvel the equivalent of $50 per share, or about $4.24 billion total. The buy-out is
Disney's largest purchase since its memorable $7.6 billion purchase of Pixar Animation
studios in 2006. Disney’s almost $4.5 billion dollar acquisition gives the worldwide
leader in family entertainment exclusive rights to the over 5,000 characters on Marvel’s
future television shows, theme park attractions, primetime movies, and video games. On
top of that, Disney has searched high and low looking for a way to reach males in their
teenage years; something that Marvel could certainly help them accomplish. Actually,
because Marvel saw such staggering growth over the last few years since introducing its
characters to the big screen, it is necessary for them to seek a greater market-share
they pump out feature films starring characters like Spiderman, Ironman, and Wolverine.
Their public appeal, combined with Disney’s track record for advancing corporate
processes that have ultimately led to an epic merger. Without a doubt, Disney believes
opportunities for long-term growth and value creation.” (( 1.)) In other words, they plan
Meanwhile, Marvel-CEO Ike Perlmutter believes that, "Disney is the perfect home for
Marvel's fantastic library of characters, given its proven ability to expand content creation
and licensing businesses". (( 2.)) Disney's tremendous size, global organization, and
infrastructure throughout the world will provide Marvel with countless growth
opportunities.
a.) Disney
Brothers Walt and Roy Disney founded the Walt Disney Company on October 16,
1923. Today, The Walt Disney Corporation is the single-largest media and entertainment
conglomerate in the world. The company initially established itself as a leader in the
hosting a cable television network, and dominating the international travel scene. It is
divided into four primary divisions: The Walt Disney Studios, Disney Parks and Resorts,
Disney Consumer Products, and Disney Media Network. Its film studio is among the
most well-known and well-respected studios in the world, and has made a countless
contribution to children’s cinema. Boasting a market cap of $63.14 billion, Disney has
remained on the DOW Jones Industrial Average since May 6, 1991. (( 3.))
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b.) Marvel
The Marvel Entertainment Group, Inc. is the largest American publisher of comic
books. The company got its start towards the end of the Great Depression, when Martin
Goodman founded what was then known as Timely Publications, in 1939. Following its
origin, Timely Publications grew unhindered during the 1940s, subsequently becoming
known as Atlas Comics in the mid-1950s. It wasn’t until 1961 that the name Marvel
Comics came about, accompanying the launch of the Fantastic Four. Marvel Comics
Publishing, and Film Production. Its Licensing Segment is involved in several joint-
ventures with large entertainment corporations, like Sony. Marvel generates most of its
revenue by “licensing” (selling) the rights of its characters to those who want to use them
to produce a profit. The recent addition, and success, of its Film Production department
is a key aspect of the negotiation, and it leaves Marvel in a good position with, or
without, Disney.
So far, it appears as though Disney and Marvel have seldom disagreed about the
idea of a merger. For the most part, they even agree about the general price of the
negotiation. However, there are many points of interest pertaining to the rights of each
party that may have prevented a concession. It is important to note that while both
parties may agree about the strategic advantages of the merger, they each want to make
sure they do not end up on the losing end at some point down the line. It is for this
reason, that each of the parties employ a staff of twenty-or-so lawyers on retainer, who
worked around the clock trying to keep key issues tilting unnoticeably in their favor.
Walking through several advantages and disadvantages for each party will help to shed
light on issues that may appear to be resistance points for each party. Investigating these
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not-so-obvious, underlying goals and expectations for each party will make analyzing the
Under the decided agreement, Marvel shareholders receive a total of $30 per
share in cash plus approximately 0.745 Disney shares for each Marvel share they own.
its more than 5,000 patented characters. Based on Marvel’s share price the day before the
merger, the current deal offers shareholders an amount that is thirty-seven-times Marvel’s
estimated 2009 earnings; a premium of almost 30%. (( 5.)) Disney did not just
relinquish those payoffs without a fight, they had to make sacrifices in order to attain the
more important of their goals and interests. Had they not made sacrifices, they most
The acquisition of marvel was valuable for Disney in two distinct ways. It
eliminated competition, and it expanded Disney’s target market to include a wider range
At first glance, Disney and Marvel may not seem like companies that would be
competing with each other, since Disney is not known for comic books and Marvel is not
known for cartoons. However, upon further investigation one can see how these
companies were competing for the same market in several ways. Marvel derives a
significant portion of its revenue from action figures, of which the main consumers are
children. Disney also markets the main characters of their most popular shows to
children. Since Marvel's toy sector was more profitable than Disney’s toy sector, the
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acquisition of Marvel is a good way for Disney to improve the profitability of their toy
sales. This also helped Disney expand their target market in the toy industry, since Marvel
action figures were more effectively targeted towards younger males. This is not to say
that Disney targeted only younger females, but, rather that action figures are so widely
organization has the ability to significantly increase Disney’s market share in the toy
industry. To top it off, the relationship with Hasbro that both companies have already
established through licensing agreements makes for a smoother transition, with no need
Another point of interest in the acquisition of Marvel is the fact that Disney will
be able to add many new characters to their very successful theme parks. In its current
state, Disney World is a place for small children. Yet, the addition of characters like
Spider-Man, The Incredible Hulk, and Iron-Man will allow Disney to successfully market
to children of all ages. It also allows Disney to introduce new rides and attractions
featuring some of the most well known Marvel characters. These additions have the
Arguably, the most profitable reason for Disney to acquire Marvel is its booming
movie business. Movies featuring Marvel characters have made billions of dollars at the
box office since 2000 (Disney). Producing movies remotely, through the use of an
external studio, has proven to be an excellent catalyst for the fast-growing "Film-
Producing" segment of Marvel's business. As a matter of fact, many predict that this
growth will persist and likely even grow larger. They have been slowly evolving their
productions and shortly they will unleash movies like Iron-Man 2, Spider-Man 4, Thor,
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and several others that are currently in the works. Similar to the momentum boost it
could give to the toy industry, acquiring Marvel may also helped Disney discover their
target audience of the movies that they produce. Movies like Iron-Man have the ability to
appeal to a very large audience, from young children, to teenagers, all the way up to
adults. This broad range of viewers is something that many Disney films lacked the
ability to obtain, and stands out as one of their only weaknesses regarding strategic
positioning.
After countless casual interactions with Marvel, Disney decidedly opened the
Negotiations in February of 2008 "to get to know them," (Disney). Disney Chief
Financial Officer Tom Staggs told Reuters. The overture began with a meeting between
Disney Chief Executive Robert Iger and Marvel CEO Ike Perlmutter and evolved into
When beginning our negotiations regarding the merger, the first step for both
parties is to identify the problem(or in this particular case, goal). See, because there is a
distributive range, and because each of them have readily identified the potential
synergistic advantages they can each develop; it is likely that the parties will have the
same goal. Obviously, the parties are opposites with regards to who they need to
negotiate with, and yet their problems remain somewhat similar. Regardless, each is
focused on the conditions of the merger; Disney is aiming to get more control, and reduce
its risk; while Marvel would like to maximize its profits, and salvage its freedom. The
needs of each party were relatively vague, and not incredibly important. The bottom line
being that neither of the parties were in any real danger if they decided to forget about the
whole deal all together. Within the context of the negotiation however, each of their
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needs aligned well with what was discussed earlier regarding the conditions of the
merger.
The goals of each party are somewhat enveloped in the "problem", yet there are
still several smaller issues remaining at the heart of the decision makers. The two major
items of dispute are the "merger agreement", and the "voting agreement". Marvel Chief
Executive- Isaac Perlmutter, owns 37% of Marvel's shares through various affiliates.
(Parnass). Upon receiving Disney's initial agreement drafts, Perlmutter was the first one
to disapprove. There was no way Marvel would accept the required forced voting, the
break-up fee of 4%, and most importantly the sanctions impinging on Perlmutter's right
to do with his shares as he pleases. Marvel's relatively much higher BATNA played a
huge role in their willingness to say "no" with ease. It was at this point, that Iger, who is
clearly Disney's decision-maker, found out who the decision maker was for Marvel, in
Mr. Perlmutter. Marvel's reluctancy to accept the merger agreement was initially due to
the fact that Disney included terms that disallowed Marvel from seeking out a better offer
if it were to arise. However, at no point in the negotiations did a third party get involved
in the dealings other than the investment banks. This is likely a result of the tremendous
Money plays a big part in any merger, especially this one. However,
relationships seem to be even more essential when dealing with niche markets like comic
books, not to mention Intellectual Property. Executives at Disney were able to see the
potential for growth at Marvel lightyears before other industry competitors. More
importantly, they wanted to keep it that way. Igor and Perlmutter both know the value of
intellectual property like the 5,000 characters that Marvel has the rights to. Thus, if
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relations are strained between Disney and Marvel, the result could be catastrophic for
many parts of Disney's organization. Poor relations could cause a paradigm shift in the
industry if Marvel decided to sell rights to competitors, instead of Disney. The simple
fact that Disney did not have that same authority over the specific marketplace that
Marvel resides in is the most important indicator of who has a better BATNA, and thus a
better chance at getting greater value from the negotiation. Each of the elements
described are, for the most part, a direct reaction to this implied power residing with
Marvel.
The negotiation still took place though, which indicates two good negotiators, if
makers' were somewhat inclined towards a competitive strategy. This is evident first in
their initial offers, where each offered the other a price that they essentially knew was out
of range. Yet, this style became even more evident in the next round of haggling, where
once again each negotiator made an offer that was almost-guaranteed to get rejected.
Although, keeping in mind Marvel's relatively strong BATNA, Iger and Disney
relinquished their lofty expectations and allowed Marvel the freedom and opportunity
think each party held on to those things that they realistically could expect to receive, and
in the end they were both rewarded for their humility with a smooth transaction.
In evaluating the merger between comic book giant Marvel and the movie giant
Disney, one can sift through the negotiations and identify the key parts of their talks in
terms of target, resistance, starting points, BATNA, and leverage. The starting point in
the negotiation for Marvel was in their initial, general offer of over $50 per share paid in
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almost entirely Disney stock. This starting point was immediately too high for Disney,
whose own starting point was somewhere between $46 and $48 per share and wanted to
pay in their stock and cash. These two starting points left plenty of room for negotiation
for a final number to be reached upon, immediately giving the bargainers the distributive
range that could be worked to attain. The resistance point from the beginning for the two
companies seemed to be that Disney did not want to pay anything over $50 per share and
that Marvel wouldn’t accept anything less than $50 per share. These clear-cut resistance
points in the negotiation may seem like there is an obvious settling point at $50, but
neither side wanted to end the negotiation without trying to get a little more. For
instance, in the final days of the negotiations Marvel negotiators gave one more push to
see if they could at least get $51 per share out of Disney, but they were yet again firm in
their resistance point. In terms of the two company’s BATNA, or Best Alternative to a
Negotiated Agreement, there seemed to be a difference between the two sides. Marvel’s
BATNA was that they could continue to do what they had been doing, producing and
financing their own movies and being their own boss, which has undoubtedly been
working in terms of their movie’s recent success. Thus, Marvel had a strong BATNA
going into the negotiations, and would likewise need to be swayed with terms that were at
least as good as what they currently had. Disney on the other hand did not seem to have
as strong of a BATNA, Marvel currently held the rights to the characters that they
wanted, but one would have to say that Disney’s BATNA would have been to just try to
license the character rights from Marvel, which is what they currently do with other
companies such as FOX. The difference between the two company’s BATNA strength
undoubtedly helped shape the negotiation, and would have to be the strongest leverage
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Marvel had. In regards to leverage, outside of BATNAs for the two companies, there was
no clear advantage. Both companies used equally respected banks as advisors to the
negotiations in Merrill-Lynch and Bank of America for Marvel and Disney, respectfully.
The biggest leverage would have to be Disney’s pure size, as one of the oldest and most
respected media monsters, their name alone and the respect entitled with it undoubtedly
helped them get some leverage in the negotiation. Overall, these are just some of the key
aspects of the negotiation between Disney and Marvel and the key determinants that
Works Cited
<http://www.fundinguniverse.com/company-histories/Marvel-
Entertainment-Group-Inc-Company-History.html >.
Rabil, Sarah. "Disney to Buy Comic Book Maker Marvel." Web. 22 Apr. 2010
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