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U.S., European Media Congloms on Global Boutique Acquisition Binge

Small content companies cashing in as big businesses widen their worldwide distribution networks

Busy as Bethesda, Md.-based Half Yard Prods. is — turning out hours and hours of unscripted programming for Discovery, TLC, Bravo, History, H2, Oxygen and National Geographic Channel, among others — nobody in the TV biz would have predicted a few years ago that the company would become a sexy acquisition target for one of Germany’s biggest media conglomerates, ProSieben.

But that was before the start of the Great Global Rollup, in which European media heavyweights and U.S. titans are jockeying to extend their reach in markets well beyond their borders.

There has been a blizzard of mergers and acquisitions involving small- to medium-sized production entities in the past few years, as deep-pocketed U.K. and other Euro players such as RTL Group, ProSieben, Endemol, Zodiak, Tinopolis and 21st Century Fox’s Shine Group look for inroads in the American market.

At the same time, Discovery Communications, NBCUniversal, Time Warner and Sony Pictures Entertainment are scooping up overseas production companies like jelly beans. Last month, Warner Bros. TV Group struck a $273 million deal to buy Netherlands-based Eyeworks Group — the clearest sign yet that the studio sees its future growth in regions like Scandinavia, Latin America and Asia. Discovery earlier this week scooped up Raw, the U.K. shingle behind its hit series “Gold Rush,” among other shows.

Half Yard fetched an estimated $50 million from ProSieben’s Red Arrow Entertainment Group, a division founded by the German conglom in 2010 for the purpose of buying production assets to house under one umbrella. In January, U.K.’s Tinopolis Group bought out one of the reality TV world’s best-known indies, Magical Elves, home of “Top Chef.”

The end game for congloms on both sides of the Atlantic is to build a fatter export pipeline for content. The valuation of the boutique companies places a premium on the skill sets of the producers who run them. What’s being bought is not a library of shows — because in most cases these companies do not own the shows they produce — but the skill set and the relationships of the producers who run them.

The goal is to achieve economies of scale — and heightened clout with network buyers around the world — by having a host of imprints developing formats and series that can become hits at home and be exploited in other big TV markets. With the Eyeworks acquisition, if Warner Bros. TV develops a hit for NBC, it will now have the infrastructure on the ground to develop a rendition of the show in Belgium or Brazil or Norway without having to hand it off to a third party.

The common thread in these deals is that they make the buyer’s IP go further, said Thomas Dey, prexy-CEO of Los Angeles-based investment bank About Corporate Finance. The company has handled a slew of recent sales, including those of Magical Elves and Half Yard.

“The European players all want a foothold in the lucrative (U.S. and U.K.) markets,” Dey said. “The thinking is you’ll build the IP in Europe and sell it in the U.S. The trend,” he adds, “is to build global distribution networks to make them more efficient distributors of content.”

Producers like Half Yard toppers Abby Greensfelder and Sean Gallagher, both former Discovery Communications execs, are a small portion of the content-bearing PVC pipe being laid around the world. But the focus on locking up people who can develop and execute programs is changing the lives of creatives who previously lived paycheck to paycheck. For starters, they’ll have more capital for developing ideas.

The resources offered by Red Arrow “will give us different ways to skin the cat that we would not otherwise have,” Greensfelder said. “Sean and I will still be able to be ourselves in our company, but we’ll be better.”

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