Media M&A Outlook Looking Stronger

EY says execs see convergence, digital as driving factors to do deals

The outlook for mergers and acquisitions in the media and entertainment sector is looking stronger as CEOs surveyed by consultant EY (formerly Ernst & Young) see convergence and digital technology advances driving additional deals.

According to EY’s 15th biannual Media & Entertainment Capital Confidence Barometer (CCB), about 31% of CEOs surveyed picked sector convergence as the greatest disruptor to media and entertainment businesses. 

Digital remains at the heart of corporate strategy in the sector. Nearly a third (31%) of executives saw the impact of digital technology on the business model at the top of the boardroom agenda over the past six months.

Those two factors are also forcing executives to seek out cross-sector deals and making deeper dives into adjacent or unrelated industries. According to the report, access to new technologies is the strongest driver toward such transactions, according to 67% of executives.

“Unprecedented, unrelenting advances in technology and the swift emergence of new platforms and services are driving change in consumer behaviors, upending long-standing media ecosystems and blurring sector lines,” said EY Global Media & Entertainment Leader, Transaction Advisory Services John Harrison in a statement. “Companies are aggressively seeking the innovation needed to position for future success and are looking to acquisitions, alliances and joint ventures to catalyze transformation.”

More than half (56%) of industry executives expect to pursue acquisitions in the next 12 months, up from 46% six months ago. This appetite for dealmaking remains well above CCB’s long-term average of 45%, pointing to an upturn in M&A in the first half of 2017. Executives also expressed a high level of confidence in key deal indicators – 92% had stable-to-positive confidence in the number of acquisition opportunities, 85% in the quality of acquisition opportunities and 94% in the likelihood of closing acquisitions.

About 73% of executives see the global economy as stable (53%) or improving (20%), but macroeconomic risks still exist. The rise of populist parties across the globe has become a rising concern for executives, with 27% of the executive surveyed regarding political stability as the most important risk to their business in the next year. However, EY said this is not causing M&E companies to slow down cross-border investment. 

Companies are also expanding their geographic reach to gain exposure to high-growth regions and under-penetrated markets, with 42% targeting a cross-border acquisition in the coming year. The top five destinations for 2017 will be the U.S., France, the UK, Germany and China.

“The M&E landscape has never been more interesting or dynamic,” Harrison said in a statement. “The pace of change is accelerating as media, entertainment, tech and telecom merge into a single ‘super sector’ of competitors and collaborators. Standing still is not an option.”