3 minute read 9 Dec 2019
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M&A and megadeals are on the agenda for media and entertainment execs

By Will Fisher

EY Global Transactions Media & Entertainment Leader

Transaction leader in media and entertainment. Passionate about helping clients formulate and execute successful inorganic strategies.

3 minute read 9 Dec 2019

Media and entertainment companies look to M&A as the fastest route to accelerate growth agendas and digital strategies.

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ccording to the EY Global Capital Confidence Barometer, the prolonged dealmaking upcycle is expected to continue for media and entertainment (M&E) executives, as 59% now expect to actively pursue M&A in the next 12 months — up from 42% in October 2018 and the long-term average of 47%. Deal value is expected to remain high, with 60% of executives expecting more megadeal (US$10b+) M&A activity in the next 12 months. The speed with which companies need to transform their portfolios is, in many cases, difficult to accomplish without engaging in bold M&A.

Dealmaking remains at the heart of corporate transformation plans

Companies are looking to M&A to navigate barriers to growth, as 60% of executives expect their M&A pipeline to increase in the next 12 months, up from 40% in October 2018. For an industry driven by talent, 63% of media and entertainment companies report having difficulty hiring staff – particularly technology specialists and those with specific skillsets. This may explain why acquiring talent is cited as the main strategic driver for pursuing acquisitions. Dealmaking is often the fastest route to build the optionality that companies need to proactively respond to evolving challenges. To unlock the capital required, 65% of executives are planning to outsource or divest some of their current operations.

M&A pipeline

60%

of M&E executives expect their M&A pipeline to increase in the next 12 months.

Regulatory uncertainty and competition weigh heavily on the C-suite

A number of external risks continue to impact boardroom strategies, with regulatory, geopolitical and local political uncertainty cited as prominent external risks by one in three executives.

Equally pressing is the increasing competition from innovative startups, with 24% of executives stating the biggest impact of digital transformation on the industry is new players entering the market. Executives are acutely aware that a new business model or route to market can quickly undermine their competitive strengths and positioning. Proactively scanning an evolving industry landscape and continually reassessing their operating models are a necessity for today’s companies.

Slowing economic growth does not infer a recession

Global economic activity has slowed in some of the major economies in 2019, but respondents still expect growth. Only 27% of executives expect a slowdown in the next 12 months, although this rises to 50% when asked about a slowdown in 2021. Today, more than three-quarters of executives (79%) see the media and entertainment sector economy as improving, up from 48% in October 2018. Further, 92% expect the M&A market to improve or remain stable in the next 12 months.

Despite some level of uncertainty about market direction, most media and entertainment respondents are positive in their outlook for the next 12 months, and expect that corporate earnings, short-term market stability, credit availability and equity valuations will further improve in the year ahead.

Summary

The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas. 

About this article

By Will Fisher

EY Global Transactions Media & Entertainment Leader

Transaction leader in media and entertainment. Passionate about helping clients formulate and execute successful inorganic strategies.