Over the past 12 months, the Media & Telecommunications sector experienced 612 announced deals, with a value of $99 billion. Broadly speaking, the sector was one of the more resilient ones during the pandemic, with deal activity remaining largely flat when compared to 2019. As we reflect back on the deal drivers of the past year, we’ll take a look at emerging trends that will continue to shape M&A in the sector through the next year and beyond. These trends include changing consumer behaviors, accelerating disruption toward a digital future and divestitures of non-core assets.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021. Explore national deals trends
Despite unprecedented challenges, deal activity in the Media & Telecommunications sector continued at nearly the same pace as 2019, with 612 deals in the past 12 months marking just a 4% decline, while announced deal value increased by 8%. Following a strong start to the year, deal activity came to a virtual standstill in March 2020 before gradually increasing to a peak over the summer and early fall.
COVID-19 forced companies to be more introspective and reconsider their core strategies. For larger conglomerates, that meant forging ahead with their digital strategies — whether that includes streaming platforms, data-driven advertising or 5G networks — and disposing of non-core assets to generate cash. For small and midsize companies, that will likely lead to consolidation across the industry in order to scale up, cut costs and compete effectively. Meanwhile, consumers have quickly adapted to the disruption COVID-19 has brought, with digital media consumption experiencing significant growth in the absence of live events.
Take for example Verizon’s recently announced majority sale of the Huffington Post to BuzzFeed. For Verizon, this sale continues its divestment from the media sector, while freeing up additional cash to pursue its 5G strategy. Plus, the terms of the sale reportedly allow Verizon to share in earnings for syndicated content across the sites. For BuzzFeed, the combined company now has more leverage to compete for advertising revenue, while consolidating back-office functions to reduce operating costs. Similarly, ViacomCBS’ recently announced sale of publisher Simon & Schuster to Bertelsmann for a reported $2.2 billion follows ViacomCBS’ strategic review of its assets and provides capital to grow its streaming offering.
Following a trend set in motion in the past two years, we’ve also seen private equity investments in the sector reach a new peak this year, with PE investments accounting for 34% of deal volumes — up from 28% in the prior year.
Without speculating on specific assets that may be up for sale, we point to how M&A activity reshaped the sector in the wake of the 2008 financial crisis, and we predict similar realignment here in the coming years.
“While the Media & Telecom sector was able to pivot to a virtual marketplace during COVID with relative ease, there is no doubt that people miss the personal experiences generated through live events, and we anticipate a full recovery post-COVID. We wouldn’t be surprised to see legislation, regulations and depressed valuations assist in this recovery.”