Technology | Media | Telecommunications

Thursday, August 20, 2015

Entertainment, Media & Communications Market Update

Consolidation continues across the key sectors of the digital technology markets within America. According to the latest market study report from PwC, entitled the "U.S. Entertainment, Media & Communications (EMC) Deal Insights," the second quarter (Q2) 2015 deal value reached $76 billion -- that's compared to $39 billion in the first quarter (Q1) 2015.

Furthermore, PwC believes that this trend is being driven by major deals in the Cable ($63 billion), Internet & Information ($6 billion) and Communications ($3 billion) sub-sectors.

The abandonment of a major Cable consolidation in Q1 2014 originally valued at $46.2 billion had opened the door for a new and even bigger proposed consolidation in Q1 2015 valued at $55.6 billion.

Meanwhile, overall mergers and acquisitions (M&A) deal volume, which declined markedly in Q1 2015 (198), recovered some lost ground in Q2 2015 (208) – spurred by Advertising & Marketing (57), Publishing (37) and Internet & Information (28) sub-sectors.

While deal volumes typically soften over the summer months, PwC says that they now foresee the M&A market to remain robust into the third quarter of 2015, and potentially beyond.

Following on the strength of Q1 2015 (which included six megadeals with $34 billion of value) the latest megadeals -- defined by PwC as deals with value greater than $1 billion -- in Q2 2015 closed even higher with seven megadeals and $71 billion of announced value.

Those seven megadeals accounted for 94 percent of total announced deal value during the quarter. However, regulatory approval of one of the seven transactions remains outstanding, with another megadeal in the Cable space contingent upon its completion.

Broader M&A volume within Entertainment, Media & Communications may have gotten off to a slow start in 2015, but PwC says that they have already seen the anticipated increase in deal volume and value by the halfway mark of this year.

Outside of the megadeals that dominate the EMC landscape, PwC continues to see technology innovation and digital transformation as key drivers of M&A in this sector. Moreover, when coupled with shareholder pressure on companies to deliver ongoing growth, PwC expects M&A activity will continue to be robust well into the second half of 2015.

Example Sub-Sector Activity and 2015 Outlook:

The Internet & Information services sub-sector announced deal volumes fell from 42 in Q1 2015 to 28 in Q2 2015 -- PwC notes that's this sub-sector's lowest quarterly total in recent history.

While volumes lagged, announced deal value increased $3.8 billion over the prior quarter, buoyed by two megadeals. It remains to be seen whether the most recent quarter volume represents an anomaly or the beginning of a sustained trend.

As one of the most natural conduits for all things digital, it is likely that deal volumes will rebound going forward. We'll have to wait for the results from the next quarter, to see if the deal upside improves the overall market outlook.