M+E Connections

The value of media and telecom sector deals grew in the second quarter of 2018, while increased interest was seen in media companies that are using artificial intelligence (AI), according to a PwC Q2 Deals Insights report released July 26.

Media and telecom deal value grew 19% in Q2 from a year ago and soared a whopping 197% in the first half of 2018, PwC said. However, Q2 deal volume declined 20% after a reaching a two-year high in Q1.

Internet and information deals remained strong in the first half, with 50 deals added in Q2. But the 97 deals for the first half was down from 116 the first half of 2017, PwC said. Deal value in the first half reached $30.7 billion, compared to $5.3 billion a year ago.

PwC previously mentioned it expected companies that have harnessed AI technology to attract interest from acquirers. In Q2, “we started to see deals in this space,” it said in the report, adding: “We anticipate this trend to likely continue to grow, as companies start to leverage the power of AI in a broad range of functions, such as targeted advertising and content monitoring.”

PwC didn’t cite any of the specific deals it was referring to and didn’t immediately respond to a request for comment.

In a report earlier this year, PwC said: “In recent years, investors have poured capital into technologies that have yet to go mainstream, but not all have advanced much beyond backing from venture capitalists.” But, since 2012, there’s been more investment in AI than any other emerging technology, including Internet of Things (IoT), augmented reality (AR) and 3D printing, according to a PwC analysis of CB Insights data. Although the media and telecom industry is “facing a level of uncertainty concerning the speed of change in areas such as AI, we expect companies that use the technology to innovate will likely garner interest from acquirers,” PwC said.

For example, it said, “we could see interest in internet advertisers that are beginning to harness AI to track ads across platforms and create personalized targeting.”

There were three announced megadeals in the first half of 2018 worth more than $5 billion, compared to no megadeals in the first half of 2017, PwC said July 26.

Megadeals accounted for about 66% of year-to-date announced deal value and there were 10 deals greater than $1 billion in value announced in the first half of 2018, according to PwC.

The largest of those megadeals was the proposed merger of T-Mobile and Sprint for $26.8 billion, it noted. The merger of the third and fourth largest U.S. wireless carriers, still subject to regulatory approval, “positions the combined company to better compete against” rivals Verizon and AT&T, respectively the first- and second-largest U.S. wireless carriers.

Among other recent deals of significance was Adobe’s $1.68 billion acquisition of the Magento e-commerce platform that PwC said “will bolster the software maker’s cloud capabilities.”

Pwc also said that after a “record-breaking start” to the year, Q2 technology sector deal value “faltered to its lowest level in five years.” The company added: “The number of deals also declined as continued high valuations and other uncertainties look to have sidelined serial tech and non-digital acquirers alike.”

Looking to the future, “tech dealmakers face a series of unknowns which impact not only their appetite for deals, but also the type of transactions available to them, including regulatory uncertainty, trade war impacts and techlash distraction,” PwC said. “The single largest inhibiting factor for deals continues to be high valuations,” it said.