M+E Daily

Mergers and acquisitions (M&As) this year are expected to be “driven by the continued convergence” of media and technology, “continued demand for data” and artificial intelligence (AI), direct-to-consumer capabilities and “the emergence of supercompetitors,” according to PwC.

PwC predicted that those companies that have AI will “have the upper hand.” Access to data and analytics and the use of AI are “not only important in supporting better decision making, but [are] vital in the battle to own the consumer and thus more of the digital value chain,” PwC said in a “Media & Telecommunications Deals insights” report, released Jan. 24.

AI “allows companies to not only build but also measure consumer engagement and satisfaction – driving efficiencies in monetization and increasing relevance” to consumers, PwC added.

In announcing its AI predictions for 2019 last month, PwC said there’s six “AI priorities” that companies “can’t afford to ignore.” They were: Structure/organize for return on investment and momentum; “teach AI citizens and specialists to work together”; “make AI responsible in all its dimensions”; “locate and label to teach the machines”; “monetize AI through personalization and higher quality”; and “combine AI with analytics,” the Internet of Things (IoT) and other technologies, including blockchain and, “eventually, quantum computing.” (https://www.pwc.com/us/en/services/consulting/library/artificial-intelligence-predictions-2019.html)

“2019 will represent a historic inflection point in the Media & Telecom sector,” Bart Spiegel, U.S. Technology, Media & Telecommunications Deals Partner at PwC, predicted in the new report Jan. 24.
That inflection point will arrive “as several vertically integrated players look to finalize their transformational deals and launch service offerings” – such as over-the-top (OTT) platforms that go direct to consumer – targeted at competing with the established subscription video on demand (SVOD) players and “disrupting the traditional business models,” he said.

And that inflection point will follow “another strong year” for M&As in the U.S. Media & Telecom sector, with 870 deals (about flat compared to 2017) and more than $122 billion of announced deal volume, according to PwC. “Deal activity in 2018 was spurred by industry consolidation, loosening regulations, and the digitization of the media industry,” the report said.

But announced deal values decreased 12% in 2018, according to PwC. Megadeals represented about 55.7% of announced deal value, with 18 deals larger than $1 billion announced, led by T-Mobile’s announced acquisition of Sprint for $26.8 billion, PwC said. That volume “aligns with the prior year which also had 18 deals greater than $1 billion in value, led by” Disney’s purchase of 21st Century Fox for $68.4 billion, PwC noted.

The merger of T-Mobile and Sprint “positions the combined company to better compete against competitors Verizon and AT&T, particularly in the roll-out of their 5G network,” according to PwC.

Advertising & marketing and Internet & Information sub-sectors, meanwhile, continued to lead in deal volume in 2018, with 284 and 215 announced deals, respectively.

There were 18 announced deals in 2018 in excess of $1 billion, including three in the fourth quarter: CommScope Holding Co./Arris International Plc ($7.4 billion), Nexstar Media Group/Tribune Media Co. ($6.4 billion) and Investor Group/Epic Games ($1.25 billion), PwC noted. The latter deal illustrated “private equity’s continued interest in the video games sub-sector,” PwC said.

Private equity interest in the Media & Telecom sector overall “picked up in 2018,” with such deals accounting for 24% of deal volume, an increase from 22% in 2017, PwC said. Private equity deals represented 31% of announced deal value, “a significant increase from 2017 when private equity only comprised 8% of total deal value,” according to PwC. Of the $37.9 billion in private equity deal value, $31.2 billion “fell within the Internet & Information subsector, which is consistent with the continued interest in online platforms as attractive acquisition targets,” it said.

Advertising & Marketing and Internet & Information “continued an established trend of being the most active sub-sectors in terms of volume,” representing 33% and 25% of total deal volume, respectively, in 2018, according to PwC. Internet & Information, telecom and broadcasting were the leading sub-sectors in terms of announced deal value, “primarily driven” by the year’s megadeals, it said.

Cable, video games and music/audio content had increases in both deal volume (71%, 150% and 45%, respectively) and deal value (71%, 22% and 92%, respectively) in 2018, PwC said.