Entertainment, Media and Communications sector deal values nearly doubled in the second quarter to $76 billion from $39 billion in the prior period, according to a report by PricewaterhouseCoopers, driven by transformative deals in the Cable ($63 billion), Internet & Information ($6 billion) and Communications ($3 billion) spaces.
Despite Comcast’s decision to abandon its purchase of Time Warner Cable in April, Charter Communications’ decision to step back up to the plate and agree to acquire TWC in a deal the consulting giant values at $56 billion (not including debt) and Verizon’s $4.4 billion purchase of AOL.
Mega-deals once again dominated the list – the seven mega-deals in the quarter accounted for 94% of the deal volume in the period.
Despite the apparent return of the mega-deal, which PwC defines as deals valued at more than $1 billion, the consulting firm was encouraged by what it called the resurgence of smaller, ore innovation-driven transactions.
“…We continue to see innovation and transformation as key drivers of M&A in the sector,” PwC Partner, Entertainment, Media & Communications Deals, Bart Spiegel said in a statement. “When coupled with shareholder pressure on companies to deliver ongoing growth, we anticipate that M&A activity will continue to be robust as we enter the second half of the year.”
The cable sector again dominated the space in terms of total value, with four deals totaling $63 billion. Leading that sector was the Charter-TWC deal, followed by Liberty Broadband’s $4.3 billion purchase of Charter stock (which will assist in financing the TWC purchase) and European telecom giant Altice’s purchase of a 70% interest in Suddenlink Communications, which PwC values at $2.9 billion (again, minus debt assumption.)
The advertising and marketing sector, perennial champs in deal volume, continued that streak in the second quarter with 57 deals valued at $1.2 billion, followed by publishing (37 deals), Internet & Information (28 deals) and Communications (27 deals).
While volumes were down slightly in the ad sector in the period – compared to 60 deals in the first quarter – PwC said there was a rise in the number of transactions involving digital/online focused advertising companies, which accounted for more than 25% of announced deals (up from 20% in Q1’15). According to PwC’s Global Entertainment & Media Outlook: 2015-2019, Internet based advertising is projected to surpass TV advertising by 2018.
After a slow start in Q1, deal volumes in the Communications sector were up more than 50% in the second quarter with 27 deals announced – one of the biggest risers in deal volume of all the EMC sectors. While announced deal values were down compared to $16B in Q1’15, overall deal value remained in the billions as two megadeals in Q2 2015 represented almost the entire $3B of deal value.
Internet & Information services announced deal volumes fell from 42 in Q1 2015 to 28 in Q2 2015 – the sub-sector’s lowest quarterly total in recent history. While volumes lagged to 28 deals from 42 in Q1, deal value increased to $6.25 billion from $2.4 billion in the first quarter, buoyed by two megadeals – Verizon-AOL and LinkedIn Corp’s $1.5 billion acquisition of online education provider Lynda.com.