Major video game deals, such as Microsoft’s $68.7 billion acquisition of Activision Blizzard and Elon Musk’s $44 billion acquisition of Twitter, have fueled M&A activity in the media sector. telecommunications and telecommunications in the 12 months through May 15 to a record $469 billion in deal value, accounting and consulting firm PwC said in a report Thursday.
This time period also includes the May 17, 2021 announcement of the $43 billion Discovery-WarnerMedia megamerger and Amazon’s $8.45 billion deal for MGM, announced shortly thereafter. There were 1,014 transactions in the 12-month period, up 28% year-over-year, PwC noted.
The company emphasized: The first half of 2022 is marked by a continued trajectory of strong M&A activity in the media and telecommunications sectors, following a recovery in the second half of 2020. “As we enter the second half of the year. In 2022, trading momentum continues at a strong pace, despite rising interest rates, a stock market decline in the tech sector and the potential for a recession.”
The PwC team argues that “economic and geopolitical uncertainty may somewhat slow down the recent frenzy of trading, but there is good reason to remain optimistic.” “A significant amount of cash is in the system to make transactions. Further, businesses are under pressure to transform; The fastest way to do that is through an M&A. “
That said, the company noted that “trading activity has recently slowed among several major media companies, following a climax driven by content and technology acquisitions to drive expansion.” streaming services.”
PwC also highlights “several emerging trends shaping M&A activity in this sector, including investment in music streaming, growing demand for sports, and the continued shift to digital advertising.” number”.
In the music scene, artists like Justin Timberlake, Shakira, Neil Young, Bob Dylan and Bruce Springsteen have sold all or part of their catalogs, plus the company notes “renewed acquisitions” interested in independent music labels and music publishers”. It expects music to “remain one of the more active areas for M&A going forward.”
In sports, “a combination of streaming, ad sales, sports gambling and other tailored games has elevated the value of teams and leagues to unprecedented heights,” explains PwC. , while noting that document repositories and other content that include original content are new income opportunities for them. Add to this that private equity has recently been allowed to buy into teams, and the company predicts “continued growth in the near future” for the deals.
Private equity deals continue to be responsible for increasing transaction activity, accounting for 42% of transactions over the past 12 months, compared with 24% of all transactions in 2018, the report said. report mentioned. “Private equity deals represent $194 billion in announced deals, about three-quarters of which are concentrated in the software and internet space,” according to PwC. “Despite the challenges big tech is facing in the stock market, small to mid-sized tech deals continue to dominate private trading volumes.”
Bart Spiegel, US media and entertainment sales leader at PwC, said media and telecom M&A “remains deeply rooted in the fundamental arguments that have driven the sector for several years: building branding around intellectual property and creating an ecosystem for direct-to-consumer marketing. “
When asked about the main drivers of M&A activity in the media and telecommunications sectors, Spiegel said The Hollywood Reporter: “It is often the large transactions that drive the transaction value, and it is the small transactions (sometimes with no disclosed transaction value) that drive the volume. This has been a consistent theme since I started working on it a decade ago. And the volume has always been in the internet and information sectors, while video games, TV and traditional movies have high value transactions. “
What has caused the slowdown in recent major media deals? “In general, I believe the big media companies are now focusing on getting their homes organized,” says Spiegel. “Many streaming platforms have recently launched, require significant content investment, are testing AVOD-based services and ensuring their underlying technology and user interface are appealing to customers. goods while competing in a finite market. This takes time, energy and financial support to ensure the goals are achieved. Combine that with the market situation and I believe the major media companies will focus on internal initiatives going forward. “
With that said, he is “very opportunistic” about M&A in the sense that “the significant intellectual property available in the market will always be attractive and aligned with the long-term goals of these companies.” .
Is the high inflation environment starting to affect trading activity directly? “We have yet to see evidence of transactions intended to tamper with the impact of a high-inflation environment on corporate performance,” said Spiegel. CHEAP. “With that being said, I think you have very sophisticated finance people sitting in the C-suite who will start looking for these traits as they explore the potential for M&A in a tight market. With current share prices and rising debt costs, companies with healthy balance sheets will be best prepared to undertake M&A in the near term. “