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Media and telecommunications: Deals 2022 outlook

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What's driving deals in 2022

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for 2022.

Digital trends shape M&A activity

Following a rebound in the second half of 2020, 2021 proved to be a strong year for M&A activity in the media and telecommunications sector, with 804 deals during the past 12 months, a 27% year-over-year increase. Announced deal value totaled a record $233 billion, driven by high-profile content acquisitions and special purpose acquisition company (SPAC) transactions.

As we head into 2022, deal activity continues at a vigorous pace, though it remains to be seen if regulatory changes could slow down activity. As companies reevaluate their portfolios and divest  assets, several trends are emerging that are shaping M&A activity in the sector. These include the demand for streaming content, rollout of 5G, increase in online gambling and strong interest from private equity buyers as the sector becomes increasingly digital.  

Strong demand for content creates value

2021 is proving to be yet another transformative year for the media and telecom sector, with AT&T's announced spinoff of WarnerMedia indicating that the major players are divesting assets to reinvest in their core strategies. Telecom companies are freeing up cash to focus on investments in 5G, spectrum and fiber, while major media companies are doubling down on content to fill their streaming offerings. The planned merger of WarnerMedia and Discovery along with Amazon's pending acquisition of MGM Studios illustrate how crucial content libraries are in order to be competitive in the streaming world. We expect that will lead to further consolidation as other streaming providers and studios seek scale.

As content becomes key to media strategies, content producers have become increasingly valuable. The recently announced acquisitions of Hello Sunshine, Moonbug Entertainment and Endeavor's scripted content division commanded impressive valuations. 

Beyond these headline-grabbing examples, deal volumes continue to illustrate the impact that digital disruption has brought to the sector, with podcasts, video games, mobile apps, cloud computing, online gambling, artificial intelligence, and augmented and virtual reality software generating significant deal activity — particularly among private equity acquirors.

While private equity deals in the sector have historically accounted for just a fraction of the overall deal volumes, private equity deals have steadily grown in share from 24% in 2018 to 37% in the past year, representing a record $104 billion of announced deal value — including several notable SPAC transactions in the digital media and online gambling spaces. As media and telecommunications companies 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 coming years.

Heading into 2022, the media and telecom sector appears primed for another active year of M&A activity. However, it remains to be seen whether potential interest rate increases or tougher regulatory stances could slow down activity.

“With Discovery's acquisition of WarnerMedia, we've reached a turning point where the last of the big telcos have seemingly abandoned their content/entertainment strategy in favor of strategic investments to their infrastructure to position themselves for future success.”

— Bart Spiegel, Media and Telecom Deals Partner

Key deal drivers

The metaverse: the next frontier

Facebook’s recent rebrand as Meta has mainstreamed the conversation about the metaverse, but the competition to define and own the metaverse has been heating up for some time. Video games have been at the forefront of the metaverse, with companies like Epic Games, Roblox and Unity pioneering these technologies on a mass scale. Similar technology has been used to revolutionize greenscreens and visual effects (VFX) for movies and TV shows.

With big tech and media conglomerates entering the fray, it won’t be long before the metaverse starts to drive more deal activity. Meanwhile, companies developing artificial intelligence, virtual reality, augmented reality and connective hardware have already become attractive acquisition targets as interest in the metaverse builds — which we expect to accelerate in the coming years.

Online gambling unlocks downstream value

Since the federal ban on sports betting was overturned in 2018, an increasing number of states have moved to legalize online gambling. While this has led to some high-profile M&A activity — including SPAC listings — the impact on deal volumes has been more significant downstream.

The rise of online gambling in the US market has unlocked value in an ecosystem of supporting industries that have become attractive M&A targets for corporates and private equity buyers alike. These include sports data and content providers, digital identity and security platforms, digital banking intermediaries and game developers. As was the case in 2021, we expect this growing sector to continue to contribute to deal volumes in 2022 and beyond.

Regulatory uncertainties in 2022

While the first year of the Biden administration largely continued the status quo, recent actions suggest the president may take a harder line toward the sector. For example, the US Department of Justice recently sued to block Penguin Random House’s acquisition of Simon & Schuster. Heading into 2022, we’re keeping a close eye on the Federal Communication Commission’s stance on net neutrality, broadband pricing regulations and media ownership caps.

While the regulatory outlook is uncertain, the recently passed infrastructure bill appears to be a boon for the sector, with $65 billion of broadband projects to improve internet access across the country. This is likely to promote substantial spending in the telecommunications sector and will further bolster 5G rollout — a key component enabling media companies to achieve their streaming and connectivity potential. 

Contact us

Bart Spiegel

Deals Partner, PwC US

Alan Stephen Jones

Technology, Media and Telecommunications Deals Leader, PwC US

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