According to PwC’s US Entertainment, Media & Communications (EMC) Deal Insights, Q2 2015 deal value reached $76 billion, compared to $39 billion in Q1 2015, driven by transformative deals in the Cable ($63 billion), Internet & Information ($6 billion) and Communications ($3 billion) subsectors.
The abandonment of a major Cable consolidation in Q1 2014 originally valued at $46.2 billion has 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 foresees the M&A market to remain robust into Q3 2015 and beyond.
Mega deals: Following on the strength of Q1 2015 (six megadeals/$34 billion of value) mega deals – defined as deals with value greater than $1 billion, Q2 2015 closed even higher with seven mega deals and $71 billion of announced value. Those seven mega deals accounted for 94 per cent of total announced deal value during the quarter. Regulatory approval of one of the seven transactions remains outstanding, with another mega deal in the Cable space contingent upon its completion.
2015 Outlook: Broader M&A volume within EMC may have gotten off to a sluggish start in 2015, however PwC saw the anticipated step-up in deal volume and value by the halfway mark of the year. Outside of the megadeals that dominate the landscape, the firm continues to see innovation and transformation as key drivers of EMC M&A. When coupled with shareholder pressure on companies to deliver ongoing growth, PwC expects M&A activity to continue to be robust well into the second half of the year.
Q2 2015 Sector Activity / 2015 Outlook:
– Cable: Cable has had a solid start to the year with four deals announced in Q1 and five announced in Q2 2015. As the bulk of the cable deal value in Q2 was driven by two mega deal transactions, PwC – along with executives, investors and consumers – are now standing by to see if these transformational cable-industry mega deals will withstand regulatory review.
– Communications: After a slow start in Q1, deal volumes were up more than 50 percent in the second quarter with 27 deals announced – one of the biggest risers in deal volume of all the EMC sectors. While announced deal values were down compared to $16 billion in Q1’15, overall deal value remained in the billions as two mega deals in Q2 2015 represented almost the entire $3 billion of deal value.
– Internet & Information: Internet & Information services announced deal volumes fell from 42 in Q1 2015 to 28 in Q2 2015 – the 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 mega deals. 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.
– Music: Music deal volumes took off in Q2 2015 ending the quarter with 10 deals compared to only three in Q1 2015. Traditional music publishing represented half of the transactions this quarter, while the other half related to digital music content, distribution and analytics. However, the real driver of the increase was interest from foreign investors looking to build their global portfolio – as inbound deals accounted for nearly 70 percent of volumes. This trend confirms that US artists remain a popular global force, and foreign investors are looking to invest in the talent and digital infrastructure driving global music consumption patterns.