Case: Walt Disney production greenmail Harvard Case Solution & Analysis

Case: Walt Disney production greenmail Case  solution

Problem at Disney:

            The company’s stock performed well recently, due to which the company became attractive for the industry giants, those intended to acquire the profitable business. For the defense from the proposed acquisition, the company adopted the greenmail tactics, which resulted in value reduction for the shareholders as the company acquired additional assets through the significant funds.

Attractive Target For sharks:

            The company has a good market position, and the stable cash flows provide the company an edge over other players of the market and new entrants. Although new entrants have good ideas for making movies and good animation styles however,the new plans and strategies require reasonable funds, which are not available for the new arrivals.

The company consistently provides differentiated products to the market, which attract the new customers as well as retain the customer base. The company has various segments, which are operating autonomously so that the large companies would not require dictating the section for the regular function. The product range of the company has a popular brand name for the customer base, and they are reluctant to switch their brands.

Walt Disney is a well-established company, which generates higher corporate value to the company. Disney holds billions of asset, which has reduced the chances of the failure, and the acquisition strategy of the company to acquire a profitable small business is a value creating activity because the new businesses have a higher potential to grow as well as there is a chance of increased risk. Moreover, the large companies have to face additional risk after the acquisition of Disney as the frequency of the change in senior management varies at Disney.

Valuation through Economic value added:

            The economic value added model is used to calculate the value of the company, which indicates that the corporation's value is currently standing at 18 billion, which means that the company is successful in creating value. Although many assumptions were taken for the calculation purposes, and the assumptions were based on market practices and historical data, therefore, the results will be close to reality. In economic value added, the profits have to be converted into cash flow, which is a difficult task and have some limitation. In addition to this, the company has good prospects as the economic value added of the business is positive. The positive economic value added indicates that the company is creating value for its shareholders.

Financial Performance of Company:

The gross profit of the company shows an inclining trend, which shows that the company has performed well in its core objective of making profits. The company is operating in the growing industry, which would affectthe market players to increase their revenues and enhance their profitability. The interest levels of the enterprise are reducing, which means that the company finances its requirements by its operational activities. The less interest payment increases the corporate profits, which is beneficial for the shareholders. Although the current assets of the company are reducing, which affects the current ratio of the company negatively,however, the company is consistently investing significant funds in its asset base. The company annually provides dividends to its shareholders, which leads to positive sentiments to the stock market as the market traders believe that adividend paying company is stable in its operations. Cash flows from the operations of the enterprise increase annually, which indicates that the company has managed its cash flows appropriately. However, the company has a poor quick ratio, but the current ratio of the company is reasonable..................

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