Twitter, Activision Blizzard Boost First-Half Media M&A, But Big Entertainment Deals Face Slowdown, PwC Says In Outlook

Media and telecom M&A activity was lively in the first half of 2022 with deals for the 12 months ending May 15 totaling 1,014, up 28% year-on-year, with a record total value $469 billion. The tally was inflated by Elon Musk ’s high-profile $44 billion bid for Twitter and Microsoft ’s planned $68 billion acquisition of Activision Blizzard . Neither deal has closed yet.

Music, sports and digital advertising deals are likely to continue brisk, according to PwC ’s latest bi-annual MA& survey, which is released each June and December. But deal activity has recently slowed among major media companies following a peak driven by content and technology acquisitions to fuel expansion of streaming services. Related Story Activision Blizzard Shareholders Vote To Require Video Game Firm To Publish Annual Report On Its Efforts To Curb Workplace Abuse The first half saw Amazon’s purchase of MGM and the Warner Media-Discovery merger close within weeks of each other this spring, among a spate of deals focused on acquiring IP that can be monetized across platforms and geographies.

“I think expecting another record-setting six months or a year for M&A to continue at this pace that we just saw over this trailing 12 months may be challenging given the environment,” said Bart Spiegel media and telecoms deal partner. He said low stock prices and higher interest rates are an issue. “At a macro level, you have pressures on some companies that, if they want to embark on an M&A strategy, are, one, ‘Hey, my stock price is down’ — so paying with something for stock is a bit limited.

And two, if I want to access the debt market, it is more expensive,” he told Deadline. “When you look at traditional and big entertainment and media companies, I think a lot of them right now are focused inward. They have recently launched streaming platforms, are exploring or embracing an AVOD strategy.

You have to make sure your tech stack can support it, your user interface is locked and loaded. They are positioning themselves for future growth. ” Among deals percolating.

Lionsgate has said it plans to announce a buyer for part of Starz this summer. Blackstone-backed Candle Media, led by Kevin Mayer and Tom Staggs, has been snapping up assets. Inflation, driven in large part by the Russia-Ukraine war and ongoing Covid-related supply chain disruptions, is at a 40-year high.

To combat it, the Federal Reserve has been hiking interest rates, including an 0. 75 percentage point increase in June with another one likely in July. The uncertainty has pummeled stocks in recent months.

“Companies will be very opportunistic, and those with a strong balance sheet will be well positioned to execute on strategic M&A. But it would have to be compelling, something that is transformational or bring a significant amount of IP,” Spiegel said. Stocks may be low but sellers aren’t necessarily willing to drop to bargain basement prices.

Nothing “is going to be on the cheap,” he said. After a flurry of sales over the past year, “I don’t see a significant amount of divestitures happening now, not in this market. ” That said, he noted, a significant amount of cash is in the system to get deals done and with businesses under pressure to transform, the fastest way to do that is through M&A.

The survey said private equity deals made up 42% of the total in the sector over the past 12 months and small to mid-size tech deals continue to dominate private deal volumes. Music has been a hub of activity as the popularity of music streaming continues to grow with big name artists (from Justin Timberlake and Shakira to Neil Young, Bob Dylan and Bruce Springsteen) selling catalogs to cash out at what looks to be a high point in the market. Buyers have varied from traditional labels to new investment funds seeking to build annuity revenue streams based on intellectual property.

There’s also been renewed acquisitions interest in independent music labels and music publishers. In sports, a mix of streaming, ad sales, sports gambling and other tailwinds have lifted team and league values. Private equity firms have recently been allowed to buy into sports teams, a privilege previously limited to individuals and family trusts, meaning the cap on demand has been lifted while the supply remains fixed.

And the ongoing shift to digital advertising favors deals involving sophisticated audience targeting and engagement tracking. .