How to Successfully Acquire Companies and Preserve Culture – According to Disney
I’ve recently completed reading The Ride of a Lifetime by Executive Chairman of The Walt Disney Company and Chairman of the Board of Directors, Robert Iger. It’s a fascinating insight into how to lead in a creative environment, however the lessons in leadership are universal. Robert took over Disney during a period of complete upheaval, when Disney was being pummeled by several disruptors including the animation powerhouse, Pixar, founded by the legendary Steve Jobs.
Iger provides a comprehensive play by play account of the journey he took during his reign as CEO (2005 – 2020), which includes the acquisition of Pixar, Lucasfilm, Marvel and 20th Century Fox. If you total the acquisition cost for those businesses, you’d be lucky to get change from 20 billion dollars. That’s a staggering figure. What’s more staggering is how Iger was able to carefully manage each acquisition, so that he not only maximised the financial impact (turning around a massive volume of highly profitable movies, TV shows, theme park attractions… the list goes on) in a short space of time, but he was able to maintain the essence of each business and not crush them under the weight of the monolithic Disney brand.
He demonstrated great respect for each business, and not from a purely nostalgic point of view, and recognised the value in integrating a business and harnessing a culture, without making it conform to the master brand. I see businesses of all kinds do this poorly and I’ve been involved in such an acquisition myself.
Several years ago, I was working with a fairly large recruitment business. We had offices all over the world and in the space we were in, we were, by far, the largest recruiter. I was working out of Melbourne and I’d been there for the rapid growth journey from just 3 people to 15 or so in just a couple of years. We were forging ahead at a rapid pace and we seemed unstoppable in the market. The company was keen to continue its growth trajectory and it saw an opportunity to buy our competitor, the number two in our local market. As soon as I heard the idea, I didn’t like it. This same CEO who suggested the buy out also taught me that he’d only buy a business “that does what we don’t”. He meant that he’d only look at acquiring a business that was going to add some complementary capability that we didn’t have – perhaps a new vertical, like office support staff, finance or IT. I saw the value in that, but it just made no sense to me that we were going to buy a business that we were crushing already.
Why pay for what you will eventually take for free?
We were approached as a group about the idea and I completely misread the tone of the meeting. What was positioned as a “what do you think of this idea?”, was actually a foregone conclusion and more of a “you need to get on board with this idea” meeting. Our CEO wasn’t interested in hearing our thoughts and just wanted us to support his idea. Stupidly, I highlighted that we were taking their business anyway, one client at a time and I couldn’t see the value in paying a premium for something that was going to be ours in a matter of time anyway. As the only voice of descent the room, I was quickly silenced and later punished when the acquisition went through and he made my equivalent from the acquired company my new boss.
We spent a few weeks working out of their offices and they spent a few weeks working in ours and we all got to know each other, in the awkward way step siblings often do. They were actually a really great group of people and we forged friendships quickly. The founder and owner had been sold a story that she was going to take some huge, high flying role with us, dropping in on offices around the globe, like a modern-day Mary Poppins, to give them advice and guidance and then flit off into the night. It’s the kind of role recruiters dream of retiring into, but it sounded too good to be true and, as it turned out, it was. It was a cock and bull story they’d put to her in order to facilitate a smooth transition and not have her say anything disparaging to her clients while we moved them across to us. I watched her sink into her chair more and more each day, as the reality dawned on her that there was never going to be any dream job of resident cheerleader for her to step into. I could tell she felt swindled.
Her feelings became known and the people she’d brought across with her left. The business didn’t grow at all as a result of the acquisition and it became clear that the acquired clients weren’t willing to pay our higher margins and felt a sense of loyalty to the original owners. The CEO had essentially taken a huge wad of cash and set it on fire. Years later he admitted that, but fell short of saying, “you were right”, as his ego wouldn’t extend that far.
So how did Robert Iger manage to integrate a unique, innovative culture such as the one cultivated at Pixar, into a lumbering beast like Disney?
Respect for the Past, Present and Future
Iger knew that these companies had been built by people. People who had invested their hearts and souls into creating something from nothing. Steve Jobs, George Lucas and Rupert Murdoch had taken a huge cheque for their work and they were selling for a strategic reason, but it wasn’t just about money. They wanted to know that their legacy would be respected and protected and they knew that Disney had the right person in charge to protect that. Iger made those promises and because he actually delivered on them, each acquisition was easier than the last. It was clear that Iger was true to his word and that he had developed a knack for keeping the essence of what made each business attractive enough to buy in the first place.
These companies had incredible assets, including talent, that needed to be nurtured. They had ways of working that needed to be adopted and learnt from (Pixar was doing things in animation that far exceeded Disney’s capability at the time, for example). Disney had to allow these processes and innovations to flourish, so Iger stepped back and allowed them to work with as much independence as possible, while still maintaining an appropriate level of corporate governance. He wasn’t writing blank cheques, but he was taking risks and giving the creative thinkers enough freedom to go on producing award winning work.
In order to maximize the value of their investments, Iger knew he needed to get the businesses working both together and independently and in harmony. The creation of their direct to consumer business – the streaming service Disney Plus, cost them hundreds of millions in the short term when they pulled content from Netflix and other platforms, but ultimately they’ve set their business up for future success by owning their distribution. The sheer volume of releases that Disney achieved and continues to achieve is truly staggering. They will continue to acquire businesses that add to their capability, and not just try and “wipe out” a nuisance competitor.
Robert Iger has written a textbook lesson in how to successfully acquire companies and preserve culture.