About 10 years ago, I invented a rule about covering mergers and acquisitions that also hasn’t failed me.
Here it’s: Will Apple buy [insert company of your choice here]? –> No.
Apple almost never buys name-brand corporations. Its largest takeover was 2014’s $3 billion deal for Beats Electronics. Apple is strict about its culture and its focus. While Microsoft has acquired its strategy to increased scale — buying Activision Blizzard for $69 billion, LinkedIn for $26 billion, Nuance Communications for $20 billion, and five other corporations for greater than $5 billion — M&A is not in Apple’s DNA.
Read more: Iger, Chapek and the making of Disney’s succession mess
For years, analysts and reporters have speculated Apple might wish to buy Disney, an organization with a market valuation of nearly $150 billion. The ties between the 2 corporations are historically strong. Apple co-founder Steve Jobs became Disney’s largest individual shareholder after Disney acquired Pixar, then owned by Jobs, for $7.4 billion in 2006. The deal also 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 near $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 can have merged if Jobs, who passed away in 2011, had lived longer.
“I think that if Steve were still alive, we’d have combined our corporations, or not less than discussed the likelihood very seriously,” Iger wrote.
Since his return as CEO in November, Iger has kept Disney’s reference to Jobs alive. Just a few months ago, many Disney employees got here to their offices to search out copies of a book, “Make Something Wonderful: Steve Jobs in His Own Words,” on their desks. Iger sent an email to all Disney employees touting the book, describing it as “one other tool from Steve — a resource for you, the reader, to spark the creativity that lives inside all of us.”
Selling Disney to Apple may very well be a storybook ending for Iger, who could argue the most effective strategy to transition Disney into a contemporary media company is to pair up with probably the most successful technology company in history. Disney’s family-friendly brand could also be a fit with Apple, which appeals to consumers around the globe.
Still, it isn’t clear Apple would have any interest in buying Disney. Beyond its treatment of M&A as anathema, Apple has no core competency running theme parks or selling the sorts of consumer products Disney offers. It almost definitely would not wish to be within the dying cable television business.
While Apple has dabbled in owning sports rights and creating scripted content for Apple TV+, the companies are so small relative to creating and selling devices that they are essentially non-material to the corporate. Apple hasn’t bothered to inform investors the variety of Apple TV+ subscribers.
On one hand, buying Disney would supercharge those fledging businesses, which could help with Apple device churn while growing subscription revenue.
On the opposite, if Apple desires to spend greater than $100 billion on an acquisition, getting an ESPN business with shrinking subscribers and a content business centered around streaming, which currently loses money, might not be its deal of selection.
Apple could buy Disney to make content for its augmented reality headset, potentially the corporate’s next major growth division, but that is probably not enough of a reason to make an acquisition.
Regulatory and culture issues
Even when Apple CEO Tim Cook fell in love with the notion of owning Disney and its associated perks (free Disney World rides for Apple employees! Content synergies for device owners!), it’s ambiguous at best, and unlikely at worst, whether regulators would allow a deal to proceed.
With Lina Khan running the Federal Trade Commission, which has tried to crack down on big tech acquisitions under her watch, the possibilities of the U.S. government allowing Apple to extend its dominance over the worldwide economy seem minute. Perhaps Apple and Disney could sue to win approval — the companies haven’t got much overlap — but the method could be time-consuming and messy, bringing unneeded uncertainty to each corporations.
For the sake of argument, as an example Apple does wish to buy Disney. As an example Disney divests or sells its legacy cable assets, ridding itself of no-growth businesses that will weigh on Apple’s earnings. Let’s even say the regulatory environment changes so the U.S. government could be more amenable to a deal.
An agreement would mean Disney’s corporate culture would should mix with Apple’s culture. The Bob Chapek era at Disney illustrated the strength of Disney’s existing culture and showcased how changing worker attitudes and expectations is not easy — even for somebody who had spent three a long time at the corporate. Merging the 2 distinct, well-established cultures looks as if a possible recipe for disaster.
The overwhelming evidence on large media mergers — AOL buying Time Warner, AT&T buying Time Warner, CBS and Viacom merging, Discovery and WarnerMedia merging — is immense value destruction.
So, could Apple in the future buy Disney? Sure. But I’m in no rush to change my M&A cardinal rule.