According to recent reports, Twitter (TWTR) is on the shopping block. The social-media network has long been rumored as a potential acquisition target, but most rumors focused on the company unwillingly being snapped up by an ambitious competitor. A recent report from Bloomberg that Twitter hired Goldman Sachs and Allen & Co. to solicit potential buyers shifted that narrative and indicates a greatly increased likelihood of a Twitter buyout.
One potential suitor is The Walt Disney Company (DIS -0.65%). Outside of Warren Buffett, it can be argued there's no CEO better at acquisitions than Disney's Bob Iger. Since taking the reins at The House of Mouse, here are a few of Iger's successful acquisitions:
- The purchase of Pixar in 2006.
- The purchase of Marvel and its host of comic-book superheroes in 2009.
- The purchase of Lucasfilm from creator George Lucas in 2012.
Add Disney's previous ESPN acquisition, and it's hard to argue the company is not the most successful acquirer ever. However, sometimes the best deal is the one not taken. Disney investors should hope the company does not buy Twitter.
Disney's successful acquisitions had a great deal in common
The aforementioned acquisitions had more than a few points in common. First, the deals were comparatively less than what the company could end up paying for Twitter. Disney paid approximately $4 billion apiece for Lucasfilm and Marvel with an additional $7.4 billion for Pixar. Twitter's market cap currently sits at $16 billion, partially as a result of buyout talk, and could increase further as it appears a bidding war is slowly building.
Second, and more importantly, these acquisitions were directly related to one of Disney's core business lines: filmed entertainment. And the results are undisputable: Out of Disney's top five movies by box office gross, four are from the company's aforementioned three acquisitions. Expanded to Disney's top 10 films, that figure is seven.
Third, these successful acquisitions provided characters for the company to leverage in other divisions. All three provided content for Disney's theme park division with Pixar's Buzz Lightyear ride and the Star Wars at Walt Disney World experience, among others, helping to monetize these assets beyond the big screen. Disney has been slow to integrate Marvel into its theme parks, but is planning to open the Iron Man Experience at Hong Kong Disneyland soon.
Not much in it for Disney
It would seem Twitter has little in common with Disney's successful acquisitions. Twitter has had problems defining itself as a social-media or news outlet, but it seems its true advantage is the quick dissemination of information, or as CEO Jack Dorsey describes it, its live-focus.
The biggest opportunity for Disney would be to use Twitter's live advantage to leverage its other media properties. One area of obvious interest is Twitter's online rights deal for Thursday Night Football games to augment Disney's ESPN franchise. This year, Twitter has streamed both the Democratic and Republican conventions, the presidential debates, and has a deal with Bloomberg TV. Additionally, Twitter is looking to partner with more sports leagues for live-steaming delivery.
There's two issues for Disney on the sports front here: First is the company has essentially doubled down on traditional subscription TV and been slow to live-stream its all-important ESPN network content. The second is Twitter's NFL content deal is only for one year. Last year Yahoo! and the NFL hosted one streaming game, so it appears the NFL is wary of a long-term contract due to the uncertainty of the streaming opportunity. By the time any acquisition deal would most likely close, it's probable the NFL season would be complete.
Outside of the NFL content deal, Twitter seems to have little overlap with Disney's other lines. Additionally, Twitter has well-documented problems with racist and sexist "trolls" using its platform, which would be incongruent with Disney's corporate image. In the end, it seems this would be a large transaction with little upside for Disney.
Disney should let this opportunity pass by.