Media and entertainment companies saw a lot more to like in one another, as mergers and acquisitions activity heated up during the second quarter of 2015.
It was a welcome rebound. The number of announced deals climbed 6% to 208 after falling to a two-year low during the first quarter, according to a new study by professional services group PwC. The value of these pacts also recovered, roughly doubling from $39 billion during the first three months of the year to $76 billion in the three-month period ending in June. Though the number of mergers and purchases increased, it’s essentially flat with other quarters, most of which have hovered around the 200 to 215 mark.
Any recovery is good news for white shoe law firms and advisers who rack up big fees playing wedding planner to media giants and technology upstarts, and a sign that any sluggishness in the mergers and acquisitions space is not systemic.
“We think that deal volume and value will continue to be strong,” said Bart Spiegel, partner, entertainment, media and communications deals at PwC. “We think it will continue on this trajectory and we’re happy to see there’s not any prolonged slowdown in the market.”
When it comes to these pacts, the media and entertainment space has a very important consolidator in John Malone, the billionaire mogul who has made no secret of his desire to mix and match cable assets. During the second quarter, one merger dwarfed them all — the union of Malone’s Charter Communications and Time Warner Cable. That hook-up is valued at $55.6 billion, or roughly two thirds of all of the deal value during the quarter. The dramatic incident of cable melding nearly didn’t happen. Charter only stepped into the fray after Comcast’s $45 billion play to takeover Time Warner Cable unraveled last spring amidst regulatory challenges.
Malone’s move on Time Warner Cable also included a $4.3 billion investment in Charter from Liberty Broadband that’s earmarked to help fund the merger. That capital infusion helped drive deal values up higher, the report notes. Malone is keeping media watchers speculating about his next checkbook-straining play, particularly after he invested in Lionsgate last February, hinting that there might be ways to deepen his involvement in the film and television studio.
When it comes to merger activity, it’s a steep fall from the heights of the Time Warner Cable deal to the next biggest pact, Verizon’s successful $4.1 billion bid for AOL Inc. That was followed by European cable and telecom operator Altice’s $2.9 billion investment in Cequel, the U.S.’s seventh largest cable operator; Lightower Fiber Network’s $1.9 billion merger with Fibertech Networks; and LinkedIn’s $1.5 purchase of online learning service provider Lynda.com. In the cases of the Lynda.com and AOL.com sales, a need for high-quality content seemed to be the motivating factor that brought companies to the negotiating table.
The most active sectors for deal-making were advertising and marketing with 57 pacts, followed by publishing with 37 pacts, internet and information companies with 28 pacts, and communications and recreation with 27 pacts apiece.
With a presidential election looming, there’s a distinct possibility that the regulatory climate could shift substantially depending upon whether Democrats retain the White House or Republicans wrest control of 1600 Pennsylvania Avenue. That uncertainty won’t impact mergers and acquisitions, Spiegel predicted.
“Because of how dynamic this marketplace is, and the fact that everything is changing at a quick pace, people can’t afford to wait around for the next election cycle to be over,” he said. “Waiting would put people at a disadvantage.”