Media and telecommunications: Deals 2022 midyear outlook

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M&A activity remains strong

The first half of 2022 was marked by the continued trajectory of strong M&A activity in the media and telecommunications sector, following the rebound in the second half of 2020. There have been 1,014 deals during the past 12 months, a 28% year-over-year increase. Announced deal value totaled a record $469 billion, driven by the high-profile Twitter deal, a series of software acquisitions and several large acquisitions in video games (e.g. Activision Blizzard Inc).

As we head into the second half of 2022, deal momentum continues at a vigorous pace, despite increasing interest rates, the stock market decline in the tech sector and a potential recession. We highlight several emerging trends shaping M&A activity in the sector, including investment in music streaming, increasing demand for sports and the continued shift to digital advertising. 

Private equity acquisitions dominate

It’s proving to be yet another year for high-profile deals in the media and telecom sector, notably with Elon Musk’s announcement to acquire Twitter for $44 billion and Microsoft’s acquisition of Activision Blizzard for $68.7 billion.

Acquiring intellectual property that can be monetized across a multitude of platforms in a variety of geographies continues to drive the investment thesis for players in the media space, and that’s been evident with some of the recent acquisitions and rumors in the market. One example: Amazon’s $8.5 billion acquisition in March of MGM Studios. However, deals activity has recently slowed among some of the major media companies, following a peak driven by content and technology acquisitions to fuel expansion of streaming services.

Private equity deals continue to be responsible for greater levels of deal activity, increasing from 24% of deals in 2018 to 42% in the past 12 months. Private equity deals represented $194 billion of announced deal value, about three-quarters of which was 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 volume of deal activity in the media and telecom sector has not slowed thus far in 2022, despite inflation and rising interest rates. While economic and geopolitical uncertainty may somewhat slow the recent torrid pace of deals, there’s good reason to remain optimistic. A significant amount of cash is in the system to get deals done. Further, businesses are under pressure to transform; the fastest way to do that is through M&A.

“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 IP and creating ecosystems to directly market to consumers.”

— Bart Spiegel, Media and Telecom Deals Partner

Key deal drivers

Riding the streaming wave

As the popularity of music streaming continues to grow revenue for key players in the industry, many big name artists have sold their catalogs as well as their writers’ and publishers’ share of future earnings. For the artist, the benefit is clear: cashing out at what looks to be a high point in the market. Meanwhile buyers vary from traditional labels increasing their margins through copyright ownership to newly formed investment funds seeking to build annuity revenue streams based on intellectual property. Artists who have sold all or part of their catalogs include Justin Timberlake, Shakira, Neil Young, Bob Dylan and Bruce Springsteen. In addition to song catalogs, we have also seen renewed acquisitions interest in independent music labels and music publishers. We expect music to remain one of the more active sectors for M&A in the near term.     

Increasing demand for sports

The demand for sports has never been higher. The combination of streaming, ad sales opportunities, sports gambling and other tailwinds have lifted team and league values to unprecedented heights. Revenue growth opportunities for sports organizations continue to rise. Some sports organizations have begun to capitalize by expanding into new areas, such as docuseries and other original media to generate revenue from sources beyond live events.

However, demand is only part of the story. 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.

Shift to digital advertising

With a massive migration of advertising spend from offline marketing to digital advertising, the emphasis on sophisticated audience targeting and engagement tracking is especially strong. High quality data underpins user experience personalization, which in turn represents an opportunity to optimize brands’ marketing spend and revenue expansion potential.

Further, consumers today are concerned about how their data is being leveraged. This is driving privacy regulations and business policy changes, notably around usage of data across certain geographic boundaries and mechanisms for capturing first-party data.

Recent M&A activity suggests that brands are looking toward consolidation of capabilities as a means to achieve operational scalability in the increasingly complex regulatory landscape. Meanwhile, ad-tech providers are seeking opportunities for capability expansion.

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Bart Spiegel

Bart Spiegel

Deals Partner, PwC US

Alan Stephen Jones

Alan Stephen Jones

Technology, Media and Telecommunications Deals Leader, PwC US

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