Press release

28 May 2019 London

Transformative power of M&A boosts dealmaking confidence for technology, media and entertainment, and telecoms businesses

LONDON, 28 MAY 2019. Confidence in the mergers and acquisition (M&A) market is rising, with 58% of technology, media and entertainment, and telecommunications (TMT) executives planning to pursue M&A in the next year – up from 42% six months ago.

Press contact

Michael Curtis

EY Global Media Relations and Social Media Assistant Director – Technology, Media & Entertainment and Telecommunications (TMT)

Media relations and social media manager. Music enthusiast and occasional writer.

  • 58% of global industry executives plan to pursue M&A in the year ahead
  • Rise in larger technology deals as mature companies seek transformational M&A 
  • Media companies and telcos pursue M&A to seize on new growth opportunities 

Confidence in the mergers and acquisition (M&A) market is rising, with 58% of technology, media and entertainment, and telecommunications (TMT) executives planning to pursue M&A in the next year – up from 42% six months ago. This is according to the 20th edition of the EY Global Capital Confidence Barometer (CCB), which indicates that concerns around regulatory headwinds and competition are not preventing businesses from harnessing the transformative power of M&A.

Seventy-three percent of TMT executive respondents expect the number of deal completions compared to the past 12 months to increase – up from 51% six months ago – despite a recent escalation in trade tensions across the globe. This is underpinned by rising confidence in economic conditions, with 94% of executives anticipating an improvement in the global economy and over three quarters expecting to see an improvement in corporate earnings (87%), credit availability (87%) and equity valuations (76%). 

The CCB indicates that all TMT executives are planning significant investment in technology this year. Nearly a quarter of sector respondents (23%) cite acquiring technology, talent, new production capabilities or innovative start-ups as the main driver for acquisitions.

M&A emerges as new growth engine for technology companies

The CCB points to a surge in deal appetite among technology businesses, owing in part to the US Federal Reserve’s decision not to increase interest rates in 2019. 

Sixty-one percent of technology respondents expect to actively pursue M&A in the next 12 months, up from 40% in October 2018. Most respondents (92%) believe that the technology sector economy is improving overall – compared with 51% six months ago, while 80% say corporate earnings, short-term market stability and credit availability are all improving. Further, 65% intend to pursue cross-border technology acquisitions, up from just 26% six months ago.

Year-on-year deal volume and value reflect this sentiment – up 2% and 39% respectively in Q1 2019, highlighting that larger technology deals are on the rise.

Ken Welter, EY Global Technology Transactions Leader, says:

“With more technology companies buying assets to extend their stack, together with a reduction in research and development and capital spending, M&A is becoming the new engine for growth. An active deal market underscores the reality that, despite geopolitical uncertainty, transformational technology deals are required to evolve today’s businesses – not only to win in the market but also to survive. To compete in this landscape, companies will also need to integrate their businesses without derailing an acquisition’s growth engine.”

Media and entertainment executives bullish in pursuit of transactions

Favorable performance of the capital markets and optimism about the transformative power of dealmaking is driving strong confidence in the M&A environment among media and entertainment (M&E) companies. Eighty-five percent of M&E respondents expect the M&A market to improve in the next 12 months, compared with 64% in October 2018. 

Despite continuing speculation around macroeconomic and geopolitical instability, most M&E executives (95%) say the sector economy is improving – up from 48% six months ago. 

The survey further highlights the imperative for companies to build agility and resilience into the enterprise, with the number of executives reviewing their portfolios on a quarterly basis rising from 23% to 49% in six months. Indeed, 53% expect to actively pursue deals in the year ahead – exceeding the 10-year survey average (46%).

Will Fisher, EY Global Media & Entertainment Transactions Leader, says:

“Media and entertainment companies continue to use M&A to position themselves for the future, as they look to acquire existing popular content and the creative talent to secure future hits, exclusive data and expertise to create unique and tailored product offerings, or access to large audiences and subscriber bases. Today’s market conditions are set to ensure that an active market continues, with increasing competition for truly unique assets. To prevail, media and entertainment executives must carefully assess the value creation opportunity available through integration, and the risks associated with achieving the estimated synergies.”

Telco M&A indicators improving, despite regulatory risks

Telecommunications sector executives are optimistic about the power of M&A to realign their technology portfolios and transform for growth. Eighty-two percent say the telco M&A market will improve in the next 12 months – up from 65% year-on-year, while 58% expect their M&A pipeline to expand in the coming year.

With 5G commercial launches close to fruition in many markets, 55% of executives say they expect to actively pursue acquisitions in the year ahead. And expansion into adjacent sectors ranks as the highest strategic growth priority for telcos (27%), as opportunities associated with the Internet of Things (IoT) offer the promise of new convergence plays. 

The regulatory environment continues to pose challenges, however, with 72% citing its influence on deal strategy.

Axel Majert, EY Global Telecommunications Transactions Leader, says:

“With digital infrastructure investment trending up worldwide, operators are reshaping their organizations to take advantage of a new growth agenda. But this requires more than simply repositioning products and services to cater for new addressable markets. Changing considerations of core and non-core activities continue to fuel the telco M&A agenda, as operators look to secure access to fresh thinking and new capabilities.” 

For more insights on the Technology, Media & Entertainment and Telecommunications CCB findings results, please visit our sector pages.
 
-ends-
Notes to Editors

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation is available via ey.com/privacy. For more information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.

About EY Global Capital Confidence Barometer

EY Global Capital Confidence Barometer is a biannual survey compiled by Euromoney Institutional Investor Thought Leadership of more than 2,900 senior executives from large companies around the world and across industry sectors. This is the 20th biannual CCB in the series, which began in November 2009; respondents for the 20th edition were surveyed in February and March 2019. Respondents represented 14 sectors, including financial services, consumer products and retail, technology, life sciences, automotive and transportation, oil and gas, power and utilities, mining and metals, diversified industrial products, and construction and real estate. The objective of the Global Capital Confidence Barometer is to gauge corporate confidence in the global and domestic economic outlook, to understand boardroom priorities in the next 12 months and to identify emerging capital practices that will distinguish those companies building competitive advantage as the global economy continues to evolve. ey.com/ccb #EYCCB

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation is available via ey.com/privacy. For more information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.