THB #460: Merge This!
Every new year there is a raft of prediction pieces about what is coming. Given the nature of industry coverage these days, it is often about M&A… good ol’ Mergers and Acquisitions.
Since Disney ate 20th Century Fox, my feeling has been that M&A was not a realistic expectation. It’s too expensive for too little return. While I am not remotely as bear-ish on Disney as most people seem to be these days, if we could all go back in time and reconsider the Fox purchase, I think most would come to the conclusion that Disney paid significantly too much and has not seen a commensurate return on investment to date, almost 5 years later (deal closed March 2019).
The weaker whales out there - Paramount, Lionsgate, and some think Warner Bros Discovery - continue to be the focal point of endless conversation. But every rumor must be followed with the key question, What does this acquisition add to the acquiring company that materially changes the acquirer’s business?
For Disney, acquiring the Fox assets it acquired made and still makes a lot of sense. Strong television business, which is 90% of what any Streamer really is. A deep library for adults, which Disney, for as super-powerful as its family branded line-up is, did not have. A third of Hulu was a choice that was debated over and over and over again until the simple fact that Disney was, after buying Fox, was 2/3 in, made the ownership of that brand an obvious choice. (No one would ever really pay $28 billion or more for it, with very limited content ownership, now.)
But in the years since the Disney acquisition, the mantra that scale is everything has clearly been disproved. This doesn’t mean that greater scale is never needed or that it cannot be a game changed if done well or that swimming in place is a good model for an ongoing business. But as a key core principle, it is fool’s gold.
Aside from the fact that there is rumor after rumor that Brian Roberts wants to expand the base of the NBCUniversal business, there are few facts that suggest Comcast really wants or needs to acquire a major asset to build their business, Linear, Streaming, Theatrical or ancillary.
We keep dipping into the idea that it would be really cool to chop up Paramount and sell its parts to buyers who desire this or that part of the company. And one certainly could. No one can know whether the company is worth more in pieces or all as one… just that finding a buyer for the whole bite is a giant challenge.
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