Major video game deals, such as Microsoft’s $68.7 billion acquisition of Activision Blizzard and Elon Musk’s $44 billion acquisition of Twitter, boosted M&A activity in the media and telecoms sector in the 12 months. through May 15, reaching a record $469 billion. Transaction cost, accounting e. Consulting firm PwC said in a report on Thursday.
That period also included an $43 billion deal for the $8.45 billion Discovery-WarnerMedia and Amazon mega-merger into MGM on May 17, 2021, which was soon to be announced. There were 1,014 transactions recorded in the 12 months, up 28% from the same period last year, PwC noted.
The first half of 2022 “marked a strong continuation of M&A activity in the media and telecoms sector following the recovery in the second half of 2020,” the company said. “As we head into the second half of 2022, business momentum continues apace despite rising interest rates, a slump in the technical sector stock market and a potential recession.
While “economic and geopolitical uncertainty may have somewhat dampened the recent horrendous pace of transactions, there is good reason to remain optimistic,” the PwC team argued. “There is a significant amount of money in the system to execute transactions. In addition, companies are under pressure to transform; The fastest way to do this is through mergers and acquisitions.
According to the company, “Transactional activity has recently slowed among some major media companies to expand streaming services following the spike in technology and content acquisition.”
PwC also highlighted “a number of emerging trends that are shaping M&A activity in the industry, including investment in music streaming, growing demand for sports and the constant shift to digital advertising.”
In music, artists such as Justin Timberlake, Shakira, Neil Young, Bob Dylan or Bruce Springsteen have sold all or part of their catalogue, and the company has indicated that it has “renewed interest in independent labels and publishers”. He expects music to “continue to be one of the most active sectors for mergers and acquisitions in the near future.”
In sports, “the combination of broadcasting, ad sales opportunities, sports betting and other extreme winds has lifted team and league values to unprecedented levels,” PwC explained, noting that documentary series and other attacks on original content offer new revenue opportunities for them. Add that private investment has just been granted the right to buy equipment, and the company predicts that business will “continue to grow for the foreseeable future.”
The report notes that private equity transactions are responsible for the increase in transaction activity levels, accounting for 42% of transactions in the last 12 months, compared to 24% of all transactions in 2018. accounted for $194 billion in transactions, about three-quarters of which were concentrated in the internet and software space,” PwC reported. “Despite the challenges faced by large tech companies in the stock market, small and medium tech transactions still dominate the volume of private transactions.”
Bart Spiegel, head of the US media and entertainment business at PwC, said media and telecom mergers and acquisitions “were still deeply rooted in the fundamental theses that had driven the industry for several years: building brands around intellectual property and ecosystems”. . ”
When asked about the key drivers in media M&A activity and telecommuting, Spiegel said the hollywood reporter“It is usually mega exchanges that determine the transaction value, and it is small exchanges (sometimes without disclosing the transaction value) that increase the volume. This has been a constant theme since I started working on it ten years ago. And Tommy has always been in the Internet and information subsectors, and video games, television and film traditionally have high value propositions.”
What caused the recent slowdown in major media transactions? “In general, I think the big media companies are now focused on getting their house in order,” Spiegel said. “Many have just launched streaming platforms that require significant investment in content, are experimenting with AVOD-based offerings and making sure their core technology and user interface appeal to their customers before competing in the end market. It takes time, energy and financial support to achieve the goals. With the market situation and I think the big media companies will focus on internal initiatives in the near future.”
It is said to be “very opportunistic” when it comes to mergers and acquisitions in the sense that “meaningful IP market access will always be attractive and consistent with the long-term goals of these companies.”
Has the high inflation environment started to have a direct impact on the business? “We have not yet seen evidence of transactions specifically designed to avoid the impact of the high inflation environment on business performance,” Spiegel said. THR. That said, I think you have a very sophisticated finance team sitting in a C-suite that will start looking for these attributes as they explore potential mergers and acquisitions in a tight market. Given current stock prices and rising debt values, companies with healthy balance sheets are better prepared for mergers and acquisitions in the near future.
Source: Hollywood Reporter
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