Media Mergers Bounced Back in 2021, Signaling Even More Deals This Year | Charts

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As competition gets fierce, analysts say target companies will get more expensive as fewer become available


If you thought last year was a transformative one for media mergers and acquisitions, experts say that 2022 could see even bigger deals and more consolidation.

In the opening weeks of this year, we’ve already seen Microsoft make a $68.7 billion all-cash play for the video-game maker Activision Blizzard, while the New York Times plunked down $550 million for the sports-news site The Athletic.

“It’s clear the activity in M&A is ramping up,” Scott Schiller, global chief commercial officer of marketing company Engine, told TheWrap. “From Web 3.0 and metaverse to streaming and sports gambling, all these things are happening at once. The larger players that have some money have to fast forward their strategy.”

Competition will get fiercer, analysts said, as media companies pursue both more content and subscribers in an increasingly fragmented market. Additionally, many of the biggest stakeholders will enter the arena with top-dollar offers as they opt to either build services or buy other companies already providing them. 

(S&P Global Market Intelligence)

In 2019, S&P Global Market Intelligence reported 1,178 total media and telecommunication deals in the U.S. and Canada. Some of the largest deals consisted of CBS and Viacom’s $20.8 billion merger and Sinclair Broadcast Group’s purchase of regional networks from Fox Sports for $10.6 billion. Hasbro also acquired Entertainment One in a $4.5 billion transaction. (Amounts are gross transaction values compiled by S&P in January 2022.)

There were 1,101 total deals in 2020 and 1,384 in 2021. As the pandemic started, there was a slowdown in M&A activity even as media consumption increased dramatically, especially in streaming. Several factors contributed to the slight decrease, including the significant drop in revenue for many of these companies due to widespread lockdowns that impacted theaters, events and theme parks — as well as the scaling back of advertising.

There was also a decline in equity values throughout 2020, making it tougher for media companies to cut deals. In part, this was because there was already a lot of consolidation leading up to COVID: Disney had already added Marvel, Lucasfilm, Pixar and 21st Century Fox; AT&T combined with WarnerMedia; AMC Entertainment consolidated by buying other movie-theater chains. This meant fewer targets available in a slower, uncertain year, while some companies were still recovering from their consolidation debt.

Then in 2021, the massive deals bounced back, the largest being Discovery combining with WarnerMedia in a whopping $103 billion transaction to form a standalone entertainment company. On the telecom side, Canadian Rogers Communications gobbled up Shaw Communications for roughly $21 billion. Of course, another key purchase last year was Amazon’s $10.5 billion acquisition of legacy studio MGM as Big Tech fights over Hollywood. There was also Vivid Seats’ $65 million acquisition of Betcha Sports as sports media and gambling gained traction.

“The last few years, debt has been quite cheap and the value of equity has been rising. This helped fuel large acquisitions,” Iliya Rybchin, partner at management consulting firm Elixirr, said. “This will not last long, and many companies hear the ticking clock, forcing them to accelerate acquisition strategies.”

For 2022, analysts anticipate continued growth accelerated by the ongoing pandemic, which has pushed many media companies to grow as consumer demand rises. Smaller digital media companies and networks will have to quickly scale as the market changes, Rybchin explained – and acquisition and consolidation are the fastest ways to get there.

(S&P Global Market Intelligence)

“The industry is in an arms race to simultaneously acquire content and subscribers,” Rybchin said. “Consolidation is one of the critical strategies … to fend off Netflix, Amazon and Apple.”

We are already seeing signs of that pressure, including Microsoft’s acquisition of Activision Blizzard, the biggest merger in the company’s history. This buy made the tech giant the world’s third-largest gaming company, right behind Tencent and Sony. The deal also follows Take-Two Interactive’s acquisition of mobile game company Zynga for $12.7 billion earlier this month. Much like the streaming wars for shows and movies, the gaming industry is competing over subscription services and gaining exclusive titles for their platforms.

“This year, you will see gaming and entertainment come together even more, and sports and tech will come together more,” Schiller said. “Streaming are the new cable bundles, so you need consolidation. Let someone buy them and figure out how to put them in one place.”