Media and telecommunications: Deals 2022 midyear outlook

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.