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Media and telecommunications deals insights: 2021 midyear outlook

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What's driving deals in 2021

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.

Media and telecom deals on the rise

Following a strong recovery in the second half of 2020, the last six months have seen continued momentum in deal activity in the media and telecom sector with 410 deals and $83 billion of announced deal value. Looking ahead, we believe the recent divergence of media and telecom companies will drive competition and increased M&A activity.

Deal volumes continue to be driven by the internet and information, advertising and marketing and telecommunications subsectors. Private equity (PE) deals reached a new high in terms of both deal volumes and value, accounting for 43% and 66%, respectively.

As we reach the midway point of 2021, we take a closer look at how recently announced megadeals are poised to reshape the media and telecom landscape, with increasingly competitive dynamics in 5G and streaming poised to drive M&A in 2021 and beyond. We’ll also take a closer look at private equity trends and emerging deal activity in the online gambling space.

Media and telecom paths diverge

AT&T shocked the sector in May when it announced that it would unwind its acquisition of WarnerMedia by merging the assets with Discovery. This announcement was the biggest sign yet that telecom giants were reversing course on their plans to expand into the media space. It followed on the heels of Verizon’s disposal of HuffPost and Yahoo/AOL, T-Mobile’s discontinuation of its TVision streaming service and AT&T’s own spinoff of DirecTV into a joint venture with TPG Capital.

Given the simultaneous rise of 5G and streaming, both sectors have become increasingly competitive and require more investment in the near term. As a result, many telecom giants are opting to exit media in order to double down on building out their 5G networks. We expect the demand for 5G capabilities — including fiber and broadband, cell towers and other technologies — to consume significant amounts of capital for telcos in the coming years.

As the streaming wars heat up, some media companies have turned their attention to content acquisition. The announced merger of WarnerMedia and Discovery brings together complementary scripted and non-scripted content to leverage across the company’s platforms, while Amazon’s announced acquisition of MGM Studios for $8.45 billion will bolster Prime’s catalogue with key franchises and a deep content library. As these media giants compete with the likes of Netflix and Disney, we expect to see a continued race for content and sports rights, as well as further consolidation among other streaming providers and studios as they seek the scale needed to remain competitive.

Meanwhile, the digital disruption brought on by COVID-19 and shifting consumer behaviors continues to make an impact on M&A. Broadcasting and cable deals have declined as the rise of streaming has accelerated cord-cutting trends. On the other hand, podcasts, video games, home delivery and wellness apps, and other disruptive media continue to generate M&A activity.

“Players in the media and telecom sector are starting to feel the stress brought on by the enormous capital requirements needed to compete and maintain relevance during this period of transformation, leading to a wave of asset reallocation.”

— Bart Spiegel, media and telecom deals partner

Key deal drivers

All in on online betting

As states address budget shortfalls brought on by COVID-19, an increasing number of them have moved to legalize online gambling in some form — whether online casinos, online poker or sports betting. We expect additional states to legalize online gambling in the years to come, and that will continue to fuel M&A.

In the past few months, we’ve seen several high-profile special purpose acquisition company (SPAC) transactions in the online gambling space, including Fertitta Entertainment, Wynn Interactive and AutoLotto. In addition to the online platforms themselves, we’ve already begun to see a downstream wave of M&A, as sports betting data and content, game developers, digital identity software, digital banking intermediaries, and other supporting industries become more attractive targets and jockey for position in this evolving ecosystem. 

Private equity deals hit new highs

Private equity deals in the media and telecom sector have historically accounted for just a fraction of the overall deal volumes, but the past year demonstrated significant and sustained interest from such firms, with 171 deals in the second half of 2020 and 176 during the past six months. PE deal values reached a record $55 billion during the past six months, with several SPAC transactions driving value in the internet and information sector, as well as TPG’s investment in DirecTV and Apollo’s acquisition of Yahoo/AOL. As media and telecom companies continue to reevaluate their business models and sell off non-core assets, we expect to see private equity firms continue to be major players in the sector in the years to come.

Contact us

Bart Spiegel

Deals Partner, PwC US

Marc Suidan

Deals Principal, PwC US

Alan Jones

Bay Area Northwest Market Managing Partner, PwC US

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