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M&A uptick seen in media and entertainment amid sector convergence

Capital Confidence Barometer, December 2016 | Media and Entertainment

Media and entertainment (M&E) executives are challenged by uncertainty over where to find growth. They face a rapidly shifting environment, not merely from evolving technologies and the emergence of new platforms, but also from sector convergence, which is driving increased competition from and collaboration with technology and telecommunications companies as TMT blurs into an integrated “super sector.” With this backdrop, nearly every M&E company is exploring a variety of strategic moves, including transactions to expand across sectors or internationally, increase scale in traditional markets or streamline business portfolios.

M&E executives have multiple deals in the pipeline

M&E executives are bullish about the acquisition market, with 85% expressing stable to positive confidence in the quality of acquisition opportunities and 94% expressing stable to positive confidence in the likelihoiod of closing a deal. More than half (56%) expect their company to actively pursue an acquisition in the next 12 months and 48% said they have five or more deals in the pipeline.

Alliances, “augmental” deals on the M&A agenda

To create value from underutilized assets, 43% of executives expect to enter into alliances, engage in M&A activity or form joint ventures. Almost half are targeting deals of US$250 million to US$1 billion in the next 12 months, deals that might have been considered “bolt-ons” in the past but are now “augmental” because they are at the heart of companies’ growth strategies.

Convergence, digital grab attention

Sector convergence is seen as the most disruptive factor to business over the next 12 months by 31% of executives. Meanwhile, 31% also say the impact of digital technology on the business model has been elevated in the boardroom agenda in the past six months.

Survey reflects stable economy, awareness of political uncertainty

Almost three-quarters of executives (73%) are confident that the global economy will remain stable or show modest growth, though there is concern about credit markets that may be set to tighten in 2017. At the same time, 27% cite political instability in their home market as an emerging risk to their core business.

Despite these risks, as low growth and disruption continue, boards are focusing on mergers, acquisitions and alliances to create value.