Confidence in the European media industry looks set to continue this year, indicating that the mergers and acquisitions (M&A) arena will be worth watching in 2005, according to a new PricewaterhouseCoopers report released yesterday.
PwC, the audit and corporate finance group, is anticipating in excess of 110 transactions in 2005,compared to the number of deals in 2004 rising by 14% to 97. Led by transactions such as the Granada-Carlton TV merger in the UK, other large deals included the £2.08bn acquisition of VNU’s directories business by Apax and Cinven, the UK private equity groups, and the £1.1bn sale by Hollinger International, the US-listed publisher, of The Telegraph Group to the Barclay brothers.
The total value of the deals struck in 2004 declined 3 per cent from the £16.8bn recorded in 2003, as difficult advertising conditions and intense competition continued to affect the media industry.
PwC said the uncertain economic conditions meant that many large media corporates “fought shy” of major strategic acquisitions, focusing instead on smaller ‘bolt-on’ deals.
Nevertheless, Olivier Wolf, UK entertainment and media partner at PwC Corporate Finance, commented: “Yet again the media sector continues to draw the PE [private equity] investors and with many looking to raise new finds in 2005, exists are likely to take priority.”
He added: “The firms will need to be able to demonstrate their ability to achieve good returns on their existing portfolio investments in order to attract prospective fund investors.”
While Europe, as a whole, experienced falling deal valuations, the UK experienced particularly strong growth in M&A activity, with transaction values rising from £3bn to £8bn and M&A volumes increasing to 43.
The media sector to generate most deal activity in 2004 was publishing, with the number of deals rising by more than one-third to 51.
PwC also predicts more activity following outsourcing deals such as the proposed Axel Springer-Bertelsmann joint venture in printing and further growth in online content and advertising demand.
