Disney's Marvel acquisition: a strategic financial analysis

Abstract

PurposeThe purpose of this paper is to assess the value and risks of Disney's 2009 $4 billion acquisition of the Marvel Entertainment Group (Marvel) in a case study utilizing the modern Graham and Dodd valuation approach.Design/methodology/approachThe paper presents a detailed valuation of Marvel in 2009 drawing on previously published Graham and Dodd methodological materials and Marvel's publicly available financial reports.FindingsDisney's $4 billion acquisition price for Marvel contained considerable risks based on certain valuation assumptions, which were identified in the context of our analysis.Research limitations/implicationsThis acquisition is a useful one for executives to study because it involves a situation many of them could face: evaluating the purchase of a great company that is seemingly a strategic fit and offered at what appears to be a reasonable price. Assessing such opportunities utilizing the modern Graham and Dodd valuation approach facilitates greater levels of insight into key assumptions, value drivers, and risks.Practical and research implicationsThis is a methodology that has proved useful to successful value investors over time.Originality/valueLessons executives in many industries can learn from a Graham and Dodd‐based valuation of the 2009 Disney acquisition of Marvel include: better risk assessment, valuation of entertainment property assets and franchise assessment.