NEW YORK, March 9, 2006 (PRIMEZONE) -- Merger and acquisition activity in the U.S. entertainment and media (E&M) market is on a strong growth trajectory, and this year is projected to reach levels not seen since 2001, according to 2006 M&A Insights -- U.S. Entertainment and Media Industry, a new report from PricewaterhouseCoopers' E&M Transaction Services Practice. Increasing levels of E&M industry consolidation -- and deconsolidation -- activity are being driven by a number of trends, led by the convergence of media, communications and technology; shifting consumer media consumption habits; and the increasing involvement and influence of private equity firms in deal making activity. Also fueling this activity is a move by some global E&M conglomerates to separate or divest non-core assets in an effort to increase shareholder value, according to the PwC report.
At $72 billion, 2005 disclosed deal value increased 17.5% during 2004 while disclosed deal volume increased 2% to 252. The casinos, broadcasting and cable segments proved most active in terms of high profile transactions and highest deal value.
"Based on activity we've seen so far, it appears that the E&M industry is on a fast track to achieve greater deal volume and higher deal value in 2006 than in 2005," said Thomas M. Rooney, Transaction Services leader of the Entertainment & Media Practice. "In addition to mega-deals with the potential to change the competitive landscape in E&M, we expect middle-market deals of all sizes, and across all sectors, to see increased activity in both value and volume. Adding to this growth are private equity firms, which are increasing their activity and investment level in E&M and related industries. We expect this to evolve as E&M conglomerates tighten their business focus, providing additional attractive investment opportunities."
PwC's analysis revealed the following five factors as key to understanding the forces that are driving consolidation in E&M segments including casinos & gaming, broadcasting, cable, motion pictures/audio visual, Internet software and services, publishing, and advertising & marketing:
-- Convergence: Consumers continue to gain more control over when,
where and how they consume content. In response to consumers'
needs and desires, media, communications, and technology industries
will increasingly converge. As a result, we expect to see
significant transactions, including deals ranging from strategic
acquisitions of niche distribution technologies to large,
non-traditional mergers that cross traditional industry boundaries.
-- Shifting content consumption: In traditional media sectors,
consumers' shifting content consumption activities will cause
media audiences to fragment and advertising spending to grow more
slowly. Conversely, in the online and interactive markets
(Internet paid search and sponsorship, video games, etc.),
advertising will increase more rapidly. Consequently, we expect
to see increased acquisitions by advertisers and advertising-based
publishers that are attempting to preserve their core revenue
streams by acquiring the ability to reach consumers online with
rich media, full-motion video, and e-commerce applications.
-- Rise of consumer-created content and communities of interest:
This trend will offer consumers alternative media options and
simultaneously provide advertisers with access to a "sticky" --
and potentially profitable -- environment of large audiences. As
traditional content providers adapt to this changing landscape,
they can seize opportunities to acquire companies that offer
specialized content or technology serving the social network
media space.
-- Continued impact of private equity firms: It is very likely that
private equity firms will maintain and grow their significant
presence, thus influencing the E&M industry. Increasingly, both
the major global private equity firms and smaller, niche-oriented
players are taking lead roles on the deals that are shaping and
re-shaping the E&M landscape. Private equity firms will continue
seeking deals in solid, cash-flow-rich media companies and sectors
that can generate strong shareholder returns.
-- Analysts and shareholders raising questions about global E&M
conglomerates: Both analysts and shareholders alike are
increasingly questioning whether global E&M conglomerates have
become too large and complex to manage effectively, and companies
are reacting. As a result, during the past two years, a
significant trend in conglomerates looking to separate their
organizations and/or divest non-core assets has occurred. (e.g.
Clear Channel, IAC/Expedia and Liberty Media/Discovery in 2005;
Viacom, Disney/ABC Radio Network and Stations, Cendant and Time
Warner book publishing in 2006). This trend appears to be
accelerating, so more E&M conglomerates deconsolidating and
shedding additional non-core assets should occur in 2006. This
trend presents opportunities for existing E&M players to
strengthen their holdings through strategic acquisitions, and
for private equity players to craft investment platforms in a
wider array of E&M sectors.
Erik Miller, Transaction Services Entertainment and Media director added, "During the past two years, E&M stock market performance has lagged the broader market indices. However, as E&M companies continue adding and monetizing their non-core assets, there is hope for building up long-term market and shareholder value. This trend will continue to spur discussions in the deal community."
For a copy of the 2006 M&A Insights -- U.S/ Entertainment and Media Industry report, visit www.pwc.com/ustransactionservices.
About PricewaterhouseCoopers
PricewaterhouseCoopers' Entertainment and Media Practice is a global network of more than 3,000 practitioners providing assurance, tax and advisory services to help clients manage risk, maximize shareholder value and support M&A activities. It addresses business challenges for its clients, including developing strategies to leverage digital technology, and marketplace positioning in industries characterized by consolidation and convergence. Known as an industry thought leader, the E&M Practice publishes the annual Global Entertainment and Media Outlook and other surveys and white papers highlighting current and future trends in the industry.
The Transaction Services group of PricewaterhouseCoopers (www.pwcglobal.com/ustransactionservices) offers a deal process that help clients bid smarter, close faster and realize profits sooner on mergers, acquisitions, divestitures and financing transactions. Dedicated deal teams operate from 15 U.S. cities and some 90 locations in North America, Latin America, Europe and Asia.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice.
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