- 31% of executives see sector convergence as the most disruptive factor to business
- 67% see digital disruption as the strongest driver for cross-sector deals
- Survey results signal an uptick in M&A in 2017
NEW YORK, 6 DECEMBER 2016. The M&A outlook for the media and entertainment (M&E) sector is being driven by sector convergence and digital disruption, according to EY’s 15th biannual Media & Entertainment Capital Confidence Barometer (CCB). Sector convergence is the greatest disruptor to M&E businesses, according to 31% of executives surveyed.
Digital remains at the heart of corporate strategy in the sector. Nearly a third (31%) of executives saw the impact of digital technology on the business model elevated on the boardroom agenda over the past six months.
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/digitalization.
John Harrison, EY Global Media & Entertainment Leader, Transaction Advisory Services, says:
“Unprecedented, unrelenting advances in technology and the swift emergence of new platforms and services are driving change in consumer behaviors, upending long-standing media ecosystems and blurring sector lines. Companies are aggressively seeking the innovation needed to position for future success and are looking to acquisitions, alliances and joint ventures to catalyze transformation.”
More than half (56%) 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. Ninety-two percent 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 percent regard political stability 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 percent 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, finds the report.
Harrison says: “The M&E landscape has never been more interesting or dynamic. The pace of change is accelerating as media, entertainment, tech and telecom merge into a single ‘super sector’ of competitors and collaborators. Standing still is not an option.”
For a full copy of the Media & Entertainment Global Capital Confidence Barometer, visit ey.com/ccb/mediaentertainment.
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How EY’s Global Media & Entertainment Sector can help your business
In an industry synonymous with creativity and innovation, the bar for business excellence is set high. You need to embrace new technology, develop new distribution models and satisfy the demands of a voracious and outspoken consumer. At the same time, it’s important to manage costs, exceed stakeholder expectations and comply with new regulations. There’s always another challenge just around the corner. EY’s Global Media & Entertainment Sector can help. We bring together a high-performance, worldwide team of media and entertainment professionals with deep technical experience in providing assurance, tax, transaction and advisory services to the industry’s leaders. Our network of professionals collaborates and shares knowledge around the world to deliver exceptional client service, leveraging our leading market share position to provide you with actionable information, quickly and reliably.
About EY’s Global Capital Confidence Barometer
The EY Global Capital Confidence Barometer is a biannual survey compiled by the Economist Intelligence Unit of more than 1,700 senior executives from large companies around the world and across industry sectors. This is the 15th semiannual Barometer in the series, which began in November 2009; respondents for the 15th edition were surveyed in August and September 2016, 50% were CEOs, CFOs and other C-level executives. The objective of the Barometer is to gauge corporate confidence in the global and domestic economic outlook, to understand boardroom priorities in the next 12 months, and to identify emerging capital practices that will distinguish those companies building competitive advantage as the global economy continues to evolve. In this survey, we had 66 respondents from media and entertainment companies. A full copy of the report is available at ey.com/ccb/mediaentertainment.