Strategic Buyers to return to the forefront in 2008 with their privateequity counterparts taking a breather. But, don't count private equity out! It remains an influence in the industryDigital convergence continues to shape the industry and foreign buyers will show greater interest NEW YORK, March 3 /PRNewswire/ -- With private equity on the sideline,2008 M&A activity in the Entertainment and Media (E&M) industry will likelybe dominated by strategic buyers, according to PricewaterhouseCoopers' E&MTransaction Services practice. Private equity firms will remain an activeplayer in the industry focusing on middle market companies largely in thepublishing, broadcasting and cable sectors. The weakening of the US dollarand the increased strength of foreign currencies such as the Euro will drawforeign interest, especially from European acquirers. (Photo: http://www.newscom.com/cgi-bin/prnh/20080303/NYM014-a ) "2008 is a wildcard. The changing economic and debt markets coupledwith the pending outcome of potentially industry transforming deals such asthe recent Microsoft's $45 billion bid for Yahoo or the pending $13 billionXM and Sirius merger make a challenging year for M&A predictions," saidThomas M. Rooney, Transaction Services leader of the US Entertainment &Media Practice. However, if the above deals are approved and completed in2008, deal value may be the highest we've seen. With a total of 341announced deals in 2007 pending closure, and mega deals announced in thelatter half of 2006 having closed or cleared in early 2008, this year isset to mirror or surpass that of 2007. PricewaterhouseCoopers' annual report, 2008 M&A Insights - USEntertainment and Media Industry, reveals that 2007 deal volume surpassedthat of 2006. Despite economic and credit market uncertainties during thelatter half of the year, a total of 1,168 transactions were completed in2007, an increase of 16% from 1,008 in 2006. The three most active E&Msectors driving deal volume in 2007 were Publishing, Internet Software &Services and Advertising & Marketing, which together accounted for 911 ofthe 1,168 deals, or 78% of total deal volume. In terms of disclosed dealvolume and value, 2007 fell short of 2006, with 331 disclosed transactionsaggregating $108.1 billion versus 341 deals totaling $129.7 billion in theprior year. (Photo: http://www.newscom.com/cgi-bin/prnh/20080303/NYM014-b ) Despite a slowdown of an overall private equity activity during thelatter of 2007, private equity buyers were extremely active in the E&Mspace, investing nearly $45 billion or 41% of 2007 disclosed deal value, upfrom $19.4 billion or 15% in 2006. Private equity deal volume increased 7%to 159 total deals. Additionally, average private equity deal value morethan tripled, rising from $245 million to $897 million in 2007. There was an increase in mega deals with 23 deals valued over $1billion- including 14 valued over $2 billion-completed in 2007, compared to16 deals over $1 billion completed in the prior year. As a percentage oftotal deal value, 2007 mega deals contributed 74%, up from about 70% in2006. Private equity completed seven of the mega deals, representing nearly50% of total mega deal value. Digital convergence and the growing importance of the Internet andonline media led E&M companies to strengthen their digital platforms,triggering much of the deal activity in 2007. "Convergence remains a key factor influencing deal activity in E&M.Consumer empowerment over how content is created and used will continue todrive E&M companies to build scale, enhance capabilities, and think outsidethe box to grab a piece of the PwC estimated $650 billion 2008 USadvertising and consumer/end-user spending pie," said Erik Miller,Transaction Services Entertainment and Media director. PwC's analysis identified several key industry trends impacting 2008M&A activity in the industry:
-- Private equity's influence remains. Private equity fundraising continued apace amidst the credit crunch. According to Private Equity Intelligence, US-focused funds raised $281 billion in 2007 -- 11.5% more than 2006. Based on these amounts raised, private equity buyers will continue to be active in the M&A area in 2008 either through direct investments or add-ons to existing platform companies. -- Middle market activity increased. With the threat of a prolonged economic downturn, the tightening of the credit market and normalized deal multiples, there will be fewer mega deals in 2008. Deals valued at less than $1 billion will be more common. -- Consolidation continues in certain E&M sectors. In 2007, there was increased consolidation in the publishing, advertising & marketing, broadcasting (middlemarket), and Internet software & services sectors. This trend will likely carry over into 2008. Regional and local publishing companies will continue to use acquisitions to increase scale. As the importance of the Internet grows, E&M companies will make strategic purchases to enhance existing online capability or enter the online market. Publicis Groupe, one of the world's leading advertising media services conglomerate, entered the digital space in 2007 with its purchase of Digitas, Inc., a leader in digital and direct marketing. -- Foreign acquirers go bargain hunting in the US. The recent interest rate cuts by the Fed only increase the attractiveness of the US as an investor's destination in the near term. In fact, foreign buyers contributed more than 12% (143 completed deals) of total US E&M deal volume (1,168 deals). Currently, 34 US deals involving foreign buyers were announced in 2007 that are pending or partially completed. For a copy of the 2008 M&A Insights - US Entertainment and MediaIndustry report, visit http://www.pwc.com/ustransactionservices. Known as an industry thought leader, the E&M Practice publishes theannual Global Entertainment and Media Outlook and other surveys and whitepapers highlighting current and future trends in the industry. About PricewaterhouseCoopers The Transaction Services group of PricewaterhouseCoopers offers a dealprocess that helps clients bid smarter, close faster and realize profitssooner on mergers, acquisitions, joint ventures, alliances sales andfinancing transactions. For companies raising money on U.S. or overseascapital markets, we offer a strategic perspective, practical solutions anda holistic service approach that helps management anticipate and resolve abroad array of transaction, financial reporting, and registration processchallenges before they can have a negative impact on deal value or timing.Our global network of over 6,000 transaction professionals and more than500 capital markets specialists operate from 16 U.S. cities and some 90locations in North America, Latin America, Europe and Asia. The TransactionServices group of PricewaterhouseCoopers(http://www.pwc.com/ustransactionservices) PricewaterhouseCoopers (http://www.pwc.com) provides industry-focusedassurance, tax and advisory services to build public trust and enhancevalue for its clients and their stakeholders. More than 146,000 people in150 countries across our network share their thinking, experience andsolutions to develop fresh perspectives and practical advice. "PricewaterhouseCoopers" refers to the network of member firms ofPricewaterhouseCoopers International Limited, each of which is a separateand independent legal entity.
