KPMG head of media David Elms predicts more media industry mergers and acquisitions in 2014

Better economic conditions and convergence are likely to increase mergers and acquisitions (M&A) activity in the media sector in 2013, according to KPMG’s head of media, David Elms.

According to research, M&A activity fell in the first three quarters of 2013, from 933 deals worldwide in 2012 at a value of $46.08bn to 854 deals this year at a value of $27.6bn.

However, according to Elms, the changing nature of the media industry means companies will be forced to change strategy to move forward, and improving economic conditions should make next year a more stable environment.

“The pace of change across the media sector is now so rapid that many businesses cannot adapt through a natural process of evolution – creating a market-leading proposition organically is becoming more difficult; companies need to make bold changes in strategy.

“Together these factors will mean that, in 2014, businesses that have been following a ‘wait and see’ position on M&A are likely to have to ‘act or get left behind’," Elms said.

Figures show that there have been 402 deals in the EMEA region so far this year, 302 in the Americas and 160 in the ASPAC region.

Elms added that new market entrants such as Instagram, Snapchat and Spotify will likely continue to challenge traditional media heavyweights, with services like Netflix and Hulu ones to watch out for.

“Many traditional media companies, such as print-based businesses, have been wounded by the significant migration to the digital delivery of media content,” said Elms. “This in itself is also likely to drive M&A activity, competition commission permitting, and it is surprising that further activity has not taken place sooner.

“Many of these businesses are moving from offering ‘secondary’ content – TV content and films which have previously been broadcast - to offering ‘primary’ content to secure a competitive advantage. This could result in these TV content providers acquiring producers of content. Furthermore, this strategy could lead to a convergence between businesses in other parts of the media sector including radio and print media.”

In the first half of 2013, the most valuable M&A activity happened in the Americas, accounting for 72 per cent of the value of deals, with EMEA at 24 per cent and the remainder in the ASPAC region.

2013 saw the unprecendented merger between advertising giants Publicis and Omnicom in a deal expected to produce $35bn revenues for the newly formed Publicis Omnicom Group.

AH

Angela Haggerty

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