Megadeals are regularly occurring in the Entertainment, Media and Communications (EMC) sector as companies rush to adapt to the substantial changes sweeping the industry. The nature of deal-making in the EMC sector convinced us to analyze these deals, how to consider their value creation potential, and therefore how to manage their integrations to realize success and increase value.
In our report, Megadeals transforming the entertainment, media and communications sector we reveal our analysis, discuss the landscape, and provide actionable next steps for positioning your large deal for game-changing M&A success.
Corporate leaders experienced in M&A are well aware of the risks if a transaction does not live up to expectations – and the opportunities if it succeeds. Many companies have honed deal-related processes and playbooks that serve them well when executing relatively small to mid-sized deals. However, we have observed that megadeals in the EMC sector pose a unique set of challenges particularly with people, technology platforms, and partnerships. These challenges can create barriers to success even for executives with significant acquisition and integration experience.
To succeed, leaders should make adjustments to navigate the specific challenges associated with megadeals. We have identified seven strategies for success.
Our research also found some interesting trends among the various EMC subsectors. In 2012 and 2013, the communications subsector generated the most megadeal volume. However, as technology changed and margins compressed for cable operators, deal activity in that subsector began to dominate. As part of our research to better understand megadeal activity we categorized each deal, across all subsectors, into four different deal types and motivating factors:
We also identified a fifth deal category, the Stake/Ownership deal, in which a wealthy individual or group buys a particular EMC “property” (casino or sports team). These deals accounted for five percent of the total EMC megadeals. Access the full report for further information on the unique factors associated with each deal type.
To get a handle on the deal-making universe, we kicked off our research by analyzing representative EMC megadeals – which we defined as those where the target/acquired business was an EMC company of at least $1 billion in size and deals that were initially announced from 2011 through June 2016. We found 90 such transactions worth a combined $624 billion.
We also found that between 2011 and 2015, the number of megadeals each year was fairly steady. For example, there were 17 deals in 2012 and 16 in 2014. However, halfway through 2016 there were already 16 megadeals – a sign that deal volume might be gaining steam.
We also noticed that total annual EMC megadeal value spiked in 2013 and was relatively steady in 2014 and 2015 ($149 billion and $135 billion respectively), as already large companies brought more parts of the EMC value chain under one roof. (See Exhibit 2A, 2B and 2C in the report for more information).
US and Global M&A Integration Leader, PwC US
Partner, Deals Practice, EMC Deals Leader, PwC US
Director, Deals Practice, PwC US