With A Flurry of Mega Deals Expected to Close This Year, 2007 activity should surpass 2006
New York, March 7, 2007 – The flood of mega private equity transactions in the entertainment and media (E&M) sector announced in the last two quarters of 2006, along with strong deal activity in early 2007, will lead to an even more robust year of transactions, according to PricewaterhouseCoopers’ E&M Transaction Services practice. Its new study,
2007 M&A Insights – US Entertainment and Media Industry,
reports that 132 deals announced in 2006 are slated to close in 2007. Building on this backlog of deal activity, both corporate buyers reacting to competitive pressures and changing technologies and private equity funds flush with cash are expected to continue investing in the sector. This could make 2007 a stronger year than 2006, when 282 disclosed deals valued at $114.6 billion were completed, a level not seen since 2002 when deal value was $118.6 billion.
“We expect private equity buyers to pick up speed this year as funds continue raising record amounts of money and firms continue to invest in the E&M sector,” said Thomas M. Rooney, Transaction Services leader of the US Entertainment & Media Practice. “Factors such as continued technological convergence, shifting consumer content consumption and evolving technology will afford new opportunities for strategic acquisitions.”
The total number of sector deals in 2006, including those where transaction value was not provided, increased 13 percent to 981.This represents a 10 percent compound annual growth rate from 2002 through 2006.
Erik Miller, Transaction Services Entertainment and Media director, said, “As consumers' media options continue to expand, E&M companies will continue to pursue the optimum business model for attracting and retaining customers. These efforts should lead to deals across a number of E&M sectors, driven by the convergence between traditional print, broadcast and home video distribution plus the growing opportunities in digital content distribution."
PwC’s analysis identified four key drivers of M&A activity in E&M segments, including advertising and marketing, print and broadcast, video and digital content distribution and portable media:
- Corporate leaders will continue to impact the deal environment in a significant way. The last two years have shown significant transactions resulting from competitive pressures and the changing technological landscape. Some of these have been mergers of public companies, while others have been divestitures or "going private" deals. Furthermore, announced deals expected to close during 2007 are significant and involve many large corporations.
- Private equity interest in the industry is growing. Private equity interest will be a significant factor driving deal activity in this industry. There were a number of mega private equity deals announced in 2006 that haven’t yet closed. According to Private Equity Intelligence, PE firms raised a staggering $404 billion globally – a 28 percent increase from 2005. US-focused funds raised $252 billion, roughly 63 percent of the global total and a 47 percent increase from 2005. With so much cash at their disposal, private equity firms will seek deals across all industries. Also, PE firms are raising industry-focused funds. That said, general funds will continue to target E&M opportunities as well.
- E&M companies are capitalizing on the digital platform to combat stagnation. As consumers’ media options continue to expand, the industry is seeing increased fragmentation across viewers, listeners and readers. This has caused some stagnation at more traditional media companies who must now fight harder for advertising dollars. Indications are that some companies will continue to try various combinations: buying properties, building up owned assets, and developing new platforms. At the same time, E&M companies will continue to pursue the optimum business model for attracting and retaining customers, be it subscription-based, advertiser-supported, or a combination. These efforts should lead to deals across a number of E&M sub-sectors, driven by the ongoing convergence between traditional print, broadcast and home video distribution, plus the growing opportunities in digital content distribution.
- Advertisers must address convergence in ways they reach consumers. Perhaps more than any E&M sub-sector, the advertisers that E&M companies rely on are facing the daunting challenge of reaching consumers through evolving technologies, such as mobile phone messaging, “bot” technology, wired and wireless gaming, and portable media players (podcasting, among others). Advertisers are increasingly relying on their agencies and partners to provide multi-channel marketing strategies that incorporate various means to address new media, along with its opportunities and risks. This has led to a growing emphasis on market research, interactive media, customer relationship-management (event marketing, branding, promotional and field advertising), and the like. Some deal activity is taking place among agencies as they look beyond traditional advertising generation and placement. High deal volume among independent agencies in 2006 suggests continued consolidation of that sector going forward.
About PricewaterhouseCoopers
PricewaterhouseCoopers’ Entertainment and Media Practice is a global network of more than 3,000 practitioners providing assurance, tax and advisory services to help clients manage risk, maximize shareholder value and support M&A activities. It addresses business challenges for its clients, including developing strategies to leverage digital technology, and marketplace positioning in industries characterized by consolidation and convergence. Known as an industry thought leader, the E&M Practice publishes the annual
Global Entertainment and Media Outlook and other surveys and white papers highlighting current and future trends in the industry.
The Transaction Services group of PricewaterhouseCoopers (
www.pwc.com/ustransactionservices ) offers a deal process that helps clients bid smarter, close faster, and realize profits sooner on mergers, acquisitions, sales and financing transactions. Dedicated deal teams operate from 16 U.S. cities and some 90 locations in North America, Latin America, Europe and Asia.
PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 140,000 people in 149 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
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