Major media and entertainment giants kept merging, buying and getting bigger throughout 2014. The consolidation furor showed no signs of abating even as the pricetag for these conglomerate hookups climbed sharply.
Thanks to a few high profile marriages, such as the proposed $48.1 billion merger of AT&T and DirecTV and the planned $46.2 billion union of Comcast and Time Warner Cable, the value of these deal increased 90%, according to a new study by PwC.
The overall volume of mergers and acquisitions remained steady year over year. The number of such pacts increased 3% to nearly 890, up from 866 in 2013. Other major mergers included Facebook’s $19.5 billion purchase of WhatsApp, Publicis Groupe’s $3.7 billion bid for Sapient, and Lenovo Group’s $2.9 billion deal for Motorola Mobility.
Most of these agreements were announced in the first half of 2014 and not all of them have been approved by the federal government as yet. That uncertainty may have depressed enthusiasm for mergers and acquisitions during the second half of 2014.
“Several players are in the wait and see mode,” said Bart Spiegel, entertainment, media & communications, deals partner, PwC US. “They’re looking closely to see if these megadeals will be approved by the appropriate regulatory bodies.”
There were also a number of rumored about deals that were never consummated such as Hasbro and Softbank’s flirtations with DreamWorks Animation.
Much of the activity was consigned to the marketing and internet sectors. The number of advertising companies joining forces jumped from 181 to 202, although the value of the pacts fell by $8.1 billion to $12.3 billion. Internet and information deals increased from 154 to 170, while the value of these mergers rose $22.8 billion to $26.1 billion. Cable pacts climbed from 16 to 21, and the value rose from $5 billion to $95 billion.
Broadcasting deals cooled off substantially following a very active market for local TV station consolidation. The number of pacts fell 87 to 59.
The motivation to increase in size and scale is different depending on the company, of course, but many players are driven by the need to compete in a rapidly evolving digital landscape. Traditional media and entertainment players are snapping up more nimble internet companies as a way to improve their distribution apparatus. In turn, the rise of streaming services such as Netflix and YouTube is increasing the value of content across the web as companies are hungry for shows, movies and other entertainments to offer up exclusively to customers.
“We see technology and entertainment and media companies coming together more and more often,” said Spiegel. “They want to find ways to make the customer experience as seamless as it possibly can be.”
With a presidential election heating up, there could be an argument for waiting to see who takes over the White House in 2016 before proceeding too far along with any sales or purchase should the regulatory climate for approving deals alter dramatically. In this case, the company that hesitates could lose.
“Their competitors are aggressive,” said Spiegel. “There’s lot of access to capital. If companies wait a year to see how everything plays out they me be out of luck. This is a dynamic landscape and you don’t have the luxury of sitting on the sidelines.”