European Media Set For Merger Activity As Markets Improve
There will be more than 100 mergers and acquisitions in the European media sector this year, as the broader market continues to stage a recovery, according to a new report from PricewaterhouseCoopers (PwC).
Encouraged by the general market recovery, M&A has found itself back on the corporate agenda, according to PwC. Last year saw the beginnings of a turnaround when transaction values increased sharply from ₏11.5 billion in 2002 to ₏16.8 billion. The second half was particularly strong and it contained all three of the year’s ₏1 billion-plus deals.
Publishing was the most active area of the European media market in 2003, with 38 transactions totalling ₏10 billion. This compares with 37 transactions and a combined ₏6.4 billion spent on broadcasting deals and 10 deals totalling ₏0.4 billion in marketing services, the latter being already relatively well consolidated in Europe.
Private equity groups played an increasingly active role in European media consolidation and were involved in 23 transactions last year, which represented over a quarter of all European media M&A deals. However, the size of the deals meant this actually represented 57% of the total deal value.
Olivier Wolf, UK entertainment & media leader at PwC, said: “Private equity houses were attracted by the strong cash generation qualities of media companies and the fragmentation of the sector, a pressing need to invest capital and a lack of competition from financially-constrained trade buyers.
“If the relatively high level of transaction activity seen in the second half of 2003 continues into 2004, deal numbers will reach 100 and deal values will exceed ₏20 billion. This means that deal volumes and values could pass levels seen in all the preceding five years bar 2000. This environment offers huge opportunities for growth-driven, acquisitive companies and for those looking for exits.”
PwC forecasts that advertising strength will continue to grow this year, boosted by the European Championships, the Olympics, improved corporate earnings and higher marketing budgets.
Television production and radio broadcasting, as well as publishing, are likely to remain the most buoyant areas for M&A activity in 2004. Marketing services companies are also likely to see a bounce back in M&A activity, as multinationals seek to develop their geographic and product networks, says the report.
Activity will also develop in the interactive media sector, as companies that survived the TMT shakeout look to use M&A as a vehicle for exits or further strategic development.