Deal Market Poised for a Strong 2012

Robust 2011 Was Fueled by Comcast-NBCU, Says PWC

By Mike Farrell -- Multichannel News, 1/30/2012 12:01:00 AM

The entertainment and media deal market soared in 2011, fueled mainly by the multibilliondollar NBCUniversal joint venture between Comcast and General Electric, according to an annual survey by PriceWaterhouseCoopers.

But a 25% increase in the average transaction size encouraged the research house to predict that the catalysts are in place for increased activity in 2012.

“The lines between media and technology are blurring as technology companies are quickly changing the media landscape and challenging existing business models of traditional E&M [entertainment and media] companies,” said PwC’s U.S. entertainment and media transaction services partner Bart Spiegel in a statement. “Additionally, the expected IPOs from social-media companies may allow them to exert greater E&M market influence. With increasing interest from nontraditional E&M players, E&M companies will need to be more aggressive in pursuit of deals as new market entrants increase competition for prime companies.”

According to PwC, total completed and disclosed E&M deal value nearly doubled, to $52 billion in 2011 from $27 billion in 2010. While backing out the Comcast/NBCU transaction (valued at about $27.3 billion) reduces total deal value to about $24.7 billion (about even with the prior year), a 14% decrease in deal volume to 687 in 2011 from 801 in 2010 helped drive the average deal value up 25% to $160 million last year from $128 million in the prior year.

PwC includes transactions across the media sector, including broadcasting, cable, publishing, video games, advertising and marketing, music, recreation and leisure, casinos and gaming and movies. Broadcasting was the biggest deal sector in 2011, with 34 deals valued at $31.2 billion, most of that coming from Comcast-NBCU. Excluding Comcast-NBCU, the broadcasting sector had 32 deals valued at $3.2 billion in 2011, up from 27 deals valued at $2.1 billion in 2010.

The cable sector saw a decline in deal activity in 2011, with total transactions numbering just 12 in 2011 vs. 25 in 2010. Deal value also dropped off significantly, to $1.1 billion in 2011 from $7.1 billion in 2010.

But PwC expects a resurgence in deal activity in the sector, especially as content needs grow rapidly for both domestic and international distributors.

“Content acquisition has risen to the top of the agenda with the accelerated adoption of digital media consumption and the rise of over-the-top services,” said PwC’s U.S. entertainment and media transaction services leader Thomas Rooney in a statement. “Companies are primed to seek out domestic and international targets to expand their libraries and push their content internationally as the shift to digital unfolds.” In addition, the continuing transition to digital media consumption is changing the landscape and delivery of consumer advertising, which could lead to M&A activity in the advertising sector.

According to PwC, international TV and cable markets will continue to present attractive M&A opportunities for U.S. networks to expand their footprint via acquisitions or collaborative partnering. For vertically integrated companies with both content and distribution, this allows another outlet to monetize their library and formats for international consumers.

Findings are based on research provided by sources including Thomson Reuters, Capital IQ, Bankruptcydata.com, Standard & Poors, Preqin, Bloomberg, PwC’s Global Entertainment and Media Outlook: 2011–2015 and PwC’s Global Gaming Outlook to 2015.