The media M&A market is booming. PwC’s new report, US Media and Telecommunications Insights Q3 2018, finds that deal volumes have reached a two-year high in Q3, registering a 9% increase compared to the same time period one year ago. Beyond sheer volume, the strategic rationale underlying the deal activity highlights the continued importance players are putting on M&A to further their position in this competitive and ever-changing landscape.
This year, many companies put innovation and consumer engagement at the forefront of their acquisition strategy. Beyond the usual motivations, companies are also looking to make acquisitions that include offerings that help them attract, engage and retain customers.
Additional trends this quarter:
- New deals do not surpass $5 billion dollars, resulting in a 43% decrease in deal value compared to Q3 2017.
- F five deals this quarter are over $1 billion dollars, accounting to $12.4 billion dollars or 69% of total deal value.
- The largest deal in Q3 is Adobe’s $4.8 billion-dollar acquisition of Marketo Inc., a cloud-based marketing platform for B2B customers.
- The Advertising & Marketing and Internet & Information sub-sectors continue to outnumber other categories in terms of deal volume with 82 and 71 deals, respectively, in Q3 2018.
- Private equity deal volumes are growing strongly this quarter, representing 26% of all deals. However, the value of private equity deals shows a 21% decline this quarter.
Significantly, many of the deals in subcategories such as Internet & Information and Advertising & Marketing show that investors are looking to acquire new platforms rather than building them. This is especially true of companies that can easily add a new service to an already existing platform in order to grow their user base. Many companies are also competing for advertising dollars and consumer engagement so they looking to invest in new platforms and new technologies to deliver personal and immersive experiences.
Importantly, new acquisitions this quarter show that companies are responding to changing consumer viewing and listening habits and shifting revenue streams. A new and notable area of growth includes podcasts. The podcast industry is growing substantially. In just five years the audience grew to grew over 325% to 98 million listeners so, or roughly 30% of the US population. In this quarter alone, there are nine podcast deals, four of which involved podcast production companies.
Additional areas for further acquisition exploration include virtual and augmented reality platforms, as well as egames (multiplayer video-game competition platform and alternative content formats created purposefully for smaller screens and shorter attention spans). As these areas continue to grow, the M&A scene is likely to keep growing and be reflective of organizations’ nee to continue to innovate and grow.