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PricewaterhouseCoopers LLP reports media deal numbers fall in 2009

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By The Drum Team, Editorial

January 18, 2010 | 4 min read

A report from PricewaterhouseCoopers LLP has revealed that the number of UK media deals hit their lowest level last year since the start of the decade during the dot com crash.

The report has found that the number of deals fell by 36 per cent in 2009 from the previous year, but also said that with the transformation of traditional media companies, continued reduction of debt levels and a steady growth in the economy, a rise in M&A activity could take place in 2010.

Last year only 29 media transactions took place in the UK worth a total of £2.7billion, down from 45 deals worth £4.1billion in 2008.

Andy Morgan, TMT corporate finance partner for PricewaterhouseCoopers LLP, said: “Trade buyers might have been expected to make a bigger splash last year given the generally low level of PE competition. But only exceptional assets were saleable and, with all but the most desperate vendors unwilling to countenance credit-crunch pricing, negotiations often ended in deadlock.”

He added that a ‘rapid recovery’ in value and volume followed the dot com crash and as a result, the company expects to see ‘a progressive return’ in 2010.

Morgan continued to look at the year ahead and said that there were several ‘sizeable deals pending completion’ at the end of 2009 which is encouraging for the future.

“As banks reach the end of track in terms of refinancing and restructuring options, we expect to see more sales of non-core assets and even the wholesale breakup of some companies in the sector. Following restructuring within this sector, banks are now financial stakeholders in a number of media assets. As a result, they will play a large role in determining the future of these companies including the seeking future sales.”

Banks will continue to focus on recovering senior capital and reducing debt, Morgan said, but added that he believed that the digital revolution would continue to generate a stream of deals this year as traditional agencies look to grow their service offer.

Nick George, media partner, PricewaterhouseCoopers LLP, said: “There is considerable unfinished business in terms of consolidation in media. Traditional advertising revenues are still eroding and old media companies have to transform to survive. This could include buying new companies that offer digital services or products, or swapping assets to become more efficient and gain ground in a particular field.”

He continued: “This is particularly pertinent for publishing. By European deal volume, publishing last year accounted for 40 per cent of total media deals (44 per cent in 2008), broadcasting 42 per cent (38 per cent in 2008) and marketing services 18 per cent (18 per cent in 2008). Publishers have previously been prominent purchasers of digital companies, leading the structural shift in the sector as they look to replace advertising-based old media businesses with those in the online space.”

George concluded by saying that the trend became more subdued in recent times due to the debts held by over-leverage companies in publishing and that the will focus more on survival than pursuing acquisitions once the economy recovers.

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