Disney Marvel Negotiation
In 2009, Disney Company purchased Marvel Entertainment.
This was a deal of $ 4 billion. The deal was sealed after length negotiations that took about three months. In the previous year before the merger, Disney had been performing poorly. They had to seek a new strategy to ensure their sustenance in the market. Therefore, by purchasing Marvel, the business would be able to attract the large pool of families as well as audiences. Negotiations involved terms of agreement, agendas, emotions as well as the evaluation of interests.
Under the deal, Disney would acquire the ownership of Marvel. The most appealing benefit that Disney would get in the merger is that it would acquire more than 5,000 characters who are currently owned by Marvel Disney is now considered as a superhero business in the world of business. The following were strengths of the negotiations. First, Disney had established its weakness in the market and wanted to develop a new strategy that would enable it to increase its audience and production. Since Marvel had different agenda, Disney saw it as an opportunity to enter into a merger.
Disney wanted to rebrand Marvel as Disney (Patton, 1991). However, through negotiations, Disney appreciated that Marvel had talented characters and potential properties that are of a great use. Thus, the major strength is that both parties ensured their interests were well presented and addressed. Thus, the terms of agreement were signed after a careful consideration of both parties. Disney’s main interest was to acquire a company that had already established itself with loyal customers. This as a major weakness because Disney went forward to release movies like, “Race to Witch Mountains, “Bedtime Stories” as well as “Confessions of a Shopaholic”.
This depicted Disney’s sole purpose of entering into merger was only increasing their production (Fisher & Shapiro, 2006). Disney wanted to turn Marvel into properties as a way of gaining more shares in the market. Apparently, Disney wanted to merger with a company that would give them what they did not have. Moreover, this was seen as a strategy for Disney to compete in the film industry. The major weakness involves the length negotiations that were undertaken. Notably, they took three months before the deal culminated to$ 4 billion.
Both parties held on their interests that were contained in terms of agreement. Disney came up with a superior proposal to Marvel before the deal was sealed (Fisher & Shapiro, 2006). Each party expected the other to bend and compromise their stance. Both Marvel and Disney wanted to benefit equally from the deal. This developed unnecessary deliberations.
The agreement to merger was initiated by Disney. In deed, Disney was looking for a chance to reach the target audience. Apparently, Disney knew that there was a void to be filed in the market. On the hand, Marvel at the time had an interest of being acquired by a company that would enable it to operate freely at the same time be provided with finances that would enable it to complete its projects (Fisher & Shapiro, 2006). Initially Marvel wanted to retain its autonomy in its operations. Therefore, an interest had developed where the two companies as they wanted to work together.
The negotiations between Disney and Marvel focused on two documents. These include: merger agreement and voting agreement. Marvel’s CEO, Isaac Perlmutter, was the main player in this negotiations. Perlmutter owns about 37% of the overall Marvel’s shares through their affiliates. In August 2009, Disney’s lawyers took the initiative of emailing drafts of the merger agreement as well a voting agreement to Marvel’s legal counsel.
Before the actual negotiations, Marvel was compelled to agree with the protection mechanisms that were contained in the developed Disney’s proposal (Lewicki, et al, 2009). The proposal contained the following: a provision, “Force the Vote” which required Marvel to put Disney’s deal before their shareholders. This was meant to prevent Marvel to enter into another bid with a third party. They were also required to break up the fee which was equal to 4% of the value of transaction. This was in case Marvel decided to end the deal of the merger (Graser, 2009).
Moreover, the proposal contained a soft lock provision. This proscribed Marvel’s board from the possible case of dropping its already established recommendations of Disney’s offer. However, the board was allowed to drop the offer in case a third party offered a more superior bid. Finally, the proposal demanded that Perlmutter should agree to two terms. The first one demanded him to vote his Marvel’s common shares in a way that it favored Disney’s transactions.
Secondly, it was demanded to veto any other form of transaction with another third party who may be interested in buying the same company for a period of 18 months. This was after the merger agreement was terminated.