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Deal value surges while volume remains flat in 2016: EY

MUMBAI: In India, M&A activity in the media and entertainment (M&E) sector registered a total of 56 deals with cumulative disclosed deal value of $1.8 billion in 2016.

In the year-ago period, the sector had seen 56 deals with a total disclosed deal value of $1.2 billion, said a report by global advisory services firm EY.

The largest deal of the sector was the $1.2 billion merger of Dish TV and Videocon D2H, which signals that consolidation is the way forward in the DTH space.

EY India partner Transaction Advisory Services, Media and Entertainment Ajay Shah said, “During the year, digital marketing players were also high on the M&A radar, as media and e-commerce companies acquired them to gain technological capabilities and target consumers with customised advertisements. TV Broadcasting was another hot segment as players in the industry made acquisitions to strengthen their presence in the rapidly growing segments of entertainment.”

The M&A outlook for the M&E sector is being driven by sector convergence and digital disruption, according to EY’s 15th biannual Media and Entertainment Capital Confidence Barometer (CCB).

Sector convergence is the greatest disruptor to M&E businesses, according to 31% of executives surveyed by EY.

Digital remains at the heart of corporate strategy in the sector. Nearly a third (31%) of the executives saw the impact of digital technology on the business model elevated on the boardroom agenda over the past six months, notes the report.

In response to both sector convergence and digital disruption, M&E executives are seeking out cross-sector opportunities. Sector blurring — companies making increasing and deeper incursions into adjacent or unrelated industries — has become a prominent feature of the current M&A market. The strongest driver of cross-sector deals, according to 67% of executives, is access to new technologies/digitalisation.

More than half (56 per cent) of industry executives expect to pursue acquisitions in the next 12 months, up from 46% six months ago. This appetite for dealmaking remains well above CCB’s long-term average of 45%, pointing to an upturn in M&A in the first half of 2017. Executives also expressed a high level of confidence in key deal indicators. 92% indicated stable-to-positive confidence in the number of acquisition opportunities, 85% in the quality of acquisition opportunities and 94% in the likelihood of closing acquisitions.

While 73% of executives see the global economy as stable (53%) or improving (20%), macroeconomic risks still exist. The rise of populist parties across the globe has become a rising concern for executives. Twenty-seven per cent regard political instability as the most important risk to their business in the next year; however, this is not causing M&E companies to slow down cross-border investment.

The report shows that companies are expanding geographic reach in order to gain exposure to high-growth regions and under-penetrated markets. Forty-two per cent of executives are targeting a cross-border acquisition in the coming year. The top five destinations for 2017 will be the US, France, the UK, Germany and China. Last year, before Brexit, the UK was number one, the report said.