US entertainment and media M&A activity has outpaced the overall US deal market in 2010

  • Content developers remain attractive investments
  • Expect increased activity in video games and social media sectors ample cash available to fuel future M&A

US entertainment and media (E&M) merger and acquisition activity outpaced the overall US deal market in 2010, according to PwC US. With the industry’s fast-paced shift to digital – and attractive levels of corporate cash reserves and private equity dry powder, PwC believes the catalysts are in place for more E&M deal activity during 2011.

In 2010, completed E&M deal volume increased slightly by 3% to 804 transactions, while total completed and disclosed deal value fell from $37.2 billion in 2009 to $33.5 billion in 2010. A primary driver of the increase in deal volume was Internet software & services (B2C) deals. PwC notes an increase in the percentage of announced transactions that did not disclose value, which could have an impact on the actual 2010 value trends. However, despite the decrease in announced deal value, the pipeline for E&M deals in 2011 points to continued improvement and a strong outlook, with more than 200 deals and $24 billion of deal value already announced and pending (including the recently approved NBC Universal joint venture between Comcast and GE).

Total entertainment & media deals by sector

Corporate deal activity remained at the forefront in 2010 with strategic buyers contributing 83% of total deal volume. However, with the decline in reported and completed corporate mega-deals (deals greater than $1 billion), total corporate E&M deal value decreased from 81% of disclosed deal value in 2009 to 59% in 2010.

Private equity solidified its presence within certain E&M subsectors with acquisitions of platform and strategic bolt-ons throughout 2010 (particularly within casinos and gaming, recreation and leisure, publishing and broadcasting). The number of private equity-backed deals increased from 126 in 2009 to 140 in 2010, while their announced value nearly doubled from $6.9 billion in 2009 to $13.7 billion in 2010. PwC sees the potential for an increased appetite for mega-deals by private equity firms.

“With almost $1 trillion of untapped committed capital worldwide, private equity is still primed to make significant acquisitions in the future,” Spiegel continued. “Look for a selection of E&M companies to re-evaluate existing business portfolios and accelerate their divestiture plans, as valuations continue to rebound and interest from private equity intensifies.”

More detail of PwC’s Global Entertainment and Media Outlook: 2010–2014 is available here.

USA, New York, NY

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