M&A in Media and Telecoms Hits Record $469 Billion in Teeth of Recession
Despite increasing interest rates, the stock market decline in the tech sector and a potential recession, M&A business among media and telcos is heating up.
The multi-billion dollar high profile deals for Twitter (Elon Musk’s intent to acquire for $44bn) and Activision Blizzard (Microsoft in for $68.7bn) aside, there have been 1,014 deals during the past 12 months, a 28% year-over-year increase, according to figures in a new PwC Mid-Year Deals Outlook report.
Taken together the value of those deals is worth a record $469 billion in which private equity acquisitions dominate, increasing from 24% of deals in 2018 to 42% in the past 12 months or $194 billion of the total. PwC notes that 75% of private equity activity is concentrated in the internet and software space.
“Despite the challenges big tech is facing in the stock market, small to mid-size tech deals continue to dominate private deal volumes.”
The headwinds of potential recession haven’t dampened demand which has been pent up since 2020 with deal momentum continues at a vigorous pace in the second half of this year.
“A significant amount of cash is in the system to get deals done,” PwC reports. “Further, businesses are under pressure to transform; the fastest way to do that is through M&A.”
Bart Spiegel, Media and Telecom deals partner at the consultancy, gives his perspective in a statement. “With buzz around metaverse technologies, M&A in media and telecom is still deeply rooted in the fundamental theses that have driven the sector for several years: building brands around owned Intellectual Property and creating ecosystems to directly market to consumers.”
Expanding on that, acquiring IP that can be monetized across a multitude of platforms in a variety of geographies continues to drive investment for players in the media space.
Following the merger of WarnerMedia with Discovery and Amazon’s purchase of MGM assets, there is a widespread view that further M&A will happen in media. There can be no room for the amount of premium streamers that are in the market now and something will have to give. The smart money is on Apple buying an independent studio like Lionsgate in order to bolster its current lean content library.
The report picks up on three areas of potential further M&A activity. It thinks the recent spate of music artists selling their catalogs to investment funds and record labels will continue, and that private equity is also circling the sports industry.
Private equity firms have recently been allowed to buy into sports teams, a privilege previously limited to individuals and family trusts. The cap on demand has been lifted while the supply remains fixed, driving up valuations.
“This combination of additional cash flow opportunities, limited supply and booming demand has primed the sports industry for continuing growth in the foreseeable future.”
The shift to digital advertising is the third macro trend and likely to continue with a strong emphasis on “sophisticated” audience targeting and engagement tracking that uses high-quality data to underpin user experience personalization.
PwC says that recent in M&A activity brands are looking toward consolidation as a means to achieve operational scalability in the increasingly complex regulatory landscape. Meanwhile, ad tech providers are seeking opportunities for capability expansion.