Media megadeals will continue to percolate in 2015, increasingly driven by private-equity companies eager to take advantage of today’s low interest rates. But they might not hit the heady dollar amounts seen last year — driven by AT&T’s planned acquisition of DirecTV and Comcast’s with Time Warner Cable — according to a new report from research and consulting firm PwC.
The two pay TV agreements added $94 billion to last year’s tally as the number of deals across entertainment, media and communications increased 2.7% to 889 with a total value of $186.2 billion, down 16.4%.
Momentum “slowed in the back half of 2014,” PwC says in its annual “US Entertainment, Media and Communications Deal Insights” report. That could reflect an “overall wait and see approach to see if the [AT&T and Comcast] deals obtain all necessary approvals to close.” In addition, many CEOs are rethinking their digital strategies as they envision the clout that two of the nation’s biggest broadband providers could wield if they consummate their acquisitions. They also are looking at “significant legislative and regulatory matters surrounding spectrum, net neutrality, ownership rules and other considerations.”
Cable companies in particular “will remain cautious” to see whether the FCC and Justice Department approve the AT&T and Comcast deals, as well as the final shape of net neutrality regulations.
Broadcasting saw a big slowdown last year, as deal volume for stations declined 32% after a busy year of consolidation agreements in 2013. As companies such as Tribune and Gannett close in on government ownership limits, there’s “potential for increased activity from private-equity buyers.”
But publishing companies might be hot to buy or sell properties. Traditional print owners likely will unload titles or consolidate around a particular territory where they enjoy economies of scale. Here, too, private equity firms might want in on subscription-based businesses with steady cash flows.
Whatever the volume of transactions, dealmakers should weigh “the cyber risk of a potential acquisition,” PwC says — especially following attacks such as the one on Sony Pictures. Hackers “are highly aware of the inconsistent cybersecurity measures that exist during these types of deals and while not frequently publicized, the number of companies exploited in these scenarios is steadily increasing.” As a result, a buyer “may be taking on an asset or brand that has less value than expected or have limited ability to maintain security over short-term.”