Huge video gaming transactions, comparable to Microsoft’s $68.7 billion acquisition of Activision Blizzard and Elon Musk’s $44 billion takeover of Twitter, boosted M&A exercise within the media and telecommunications industries for the 12 months by way of Could 15 to a file $469 billion in deal worth, accounting and consulting companies agency PwC mentioned in a Thursday report.

The interval additionally included the Could 17, 2021 announcement of the $43 billion Discovery-WarnerMedia megamerger and Amazon’s $8.45 billion deal for MGM, which was unveiled quickly after that. There have been 1,014 offers over the 12-month interval, a 28 p.c enhance over the identical interval a 12 months earlier, PwC famous.

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The primary half of 2022 was “marked by the continued trajectory of robust M&A exercise within the media and telecommunications sector, following the rebound within the second half of 2020,” the agency highlighted. “As we head into the second half of 2022, deal momentum continues at a vigorous tempo, regardless of rising rates of interest, the inventory market decline within the tech sector and a possible recession.”

Whereas “financial and geopolitical uncertainty could considerably gradual the current torrid tempo of offers, there’s good cause to stay optimistic,” the PwC crew argued. “A big amount of money is within the system to get offers achieved. Additional, companies are beneath stress to rework; the quickest means to try this is thru M&A.”

That mentioned, the agency did observe that “offers exercise has just lately slowed amongst a number of the main media firms, following a peak pushed by content material and expertise acquisitions to gasoline enlargement of streaming companies.”

PwC additionally highlighted “a number of rising traits shaping M&A exercise within the sector, together with funding in music streaming, rising demand for sports activities and the continued shift to digital promoting.”

In music, artists comparable to Justin Timberlake, Shakira, Neil Younger, Bob Dylan and Bruce Springsteen have offered all or a part of their catalogs, plus the agency famous “renewed acquisitions curiosity in impartial music labels and music publishers.” It expects music to “stay one of many extra energetic sectors for M&A within the close to time period.”

In sports activities, “the mixture of streaming, advert gross sales alternatives, sports activities playing and different tailwinds have lifted crew and league values to unprecedented heights,” PwC defined, noting docuseries and different forays into authentic content material as new income alternatives for them. Add in that non-public fairness have just lately been allowed to purchase into groups, and the corporate predicts “persevering with progress within the foreseeable future” for offers.

Non-public fairness offers proceed to be liable for rising ranges of deal exercise, accounting for 42 p.c of offers over the previous 12 months, in contrast with 24 p.c of all offers in 2018, the report talked about. “Non-public fairness offers represented $194 billion of introduced deal worth, about three-quarters of which was concentrated within the web and software program area,” in response to PwC. “Regardless of the challenges large tech is going through within the inventory market, small to mid-size tech offers proceed to dominate personal deal volumes.”

Bart Spiegel, U.S. leisure and media offers chief at PwC, mentioned that media and telecom M&A was “nonetheless deeply rooted within the elementary theses which have pushed the sector for a number of years: constructing manufacturers round owned IP and creating ecosystems to straight market to customers.”

Requested about key drivers for media and telecom M&A exercise, Spiegel advised The Hollywood Reporter: “It’s often the mega-deals that drive deal worth, and it’s the the small offers (generally with no disclosed deal worth) that drive volumes. This has been a constant theme since I began working with this a decade in the past. And the volumes are at all times within the web and data sub-sector, whereas the video video games, TV and movie historically have the excessive worth offers.”

What has precipitated the current slowdown in main media offers? “On the whole, I imagine main media firms are at present targeted on getting their home so as,” Spiegel mentioned. “Many have just lately launched streaming platforms, which require vital content material funding, are experimenting with AVOD primarily based choices and guaranteeing their underlying expertise and person interface are enticing to their prospects all whereas competing in a finite market. This takes time, vitality and monetary assist to make sure aims are met. Compound that with the state of the market, and I imagine the key media firms will likely be targeted on inside initiatives within the fast future.”

That being mentioned, he’s “very opportunistic” about M&A within the sense that “vital IP changing into obtainable out there will at all times be enticing and is aligned with the long-term aims of those firms.”

Has the high-inflation surroundings began to have an effect on dealmaking straight? “We’ve but to see proof of offers particularly seeking to tamper the results of a high-inflationary surroundings on the run-rate working outcomes of a enterprise,” Spiegel advised THR.  “That being mentioned, I do assume you will have very refined finance personnel sitting within the C-suite who will begin to search for these attributes as they discover potential M&A in a good market. Given present inventory costs and rising price of debt, these firms with a wholesome stability sheet will likely be greatest poised to execute on M&A within the near-term.”

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