PricewaterhouseCoopers 2010 M&A Insights - US Entertainment & Media Outlook

NEW YORK, Feb. 8 /PRNewswire/ -- Though economic and financing challenges still exist, positive pipeline metrics seen in the second half of 2009 could signal a rebound of deal activity in the US Entertainment & Media (E&M) industry in 2010, according to PricewaterhouseCoopers' (PwC) Transaction Services 2010 US Entertainment & Media M&A Insights report.  

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In 2009, E&M completed deal value totaled $77.4 billion, representing a 49 percent annual decline from the prior year, while completed deal volume totaled 714 deals, a decrease of 29 percent from the 1,000 deals completed in 2008.  Completed E&M deals in 2009 represented 12.3 percent and 13.3 percent of total completed US M&A transaction value and volume, respectively.

"Continuing signs of gradual economic recovery and an anticipated easing of credit markets point to a potential uptick in E&M deal activity," said Thomas Rooney, Entertainment & Media Leader, PricewaterhouseCoopers' Transaction Services.  "While Entertainment & Media companies and investors are currently focusing on driving efficiencies by zeroing in on their core competencies, in 2010, we believe there will also be a renewed focus on new media opportunities as the industry's tolerance for risk rebounds and attention shifts towards higher growth."

According to PwC's report, the past year presented strategic opportunities for well-capitalized corporate buyers although challenging credit markets drove E&M deal value and volume to the lowest levels since 2004 and 2003, respectively. "Responding to the shift toward new media, E&M companies are seeking opportunities to capture value online with mobile and technology leading M&A activity.  Given the level of success that certain technology giants have had in revolutionizing the distribution of media through convergence, we expect similar interest to continue well into 2010."

Additionally, 2009 saw continued interest from private equity, with a total of 126 financial sponsor-backed E&M deals completed. Popular sectors for private equity investment included Advertising & Marketing, Publishing and Internet Software & Services.  According to the PwC report, as investors continue to assess the cyclical and structural issues within certain E&M sub-sectors, interest from financial sponsors is expected to permeate even further via bolt-on acquisitions and new platform company investments.

Burdened by untenable debt levels, several high-profile E&M companies in 2009 also faced the prospect of defaulting on debt, exploring restructuring alternatives, or even seeking bankruptcy protection. In 2009, Chapter 11 bankruptcies among US based E&M companies (with prepetition liabilities greater than $100 million) increased threefold to 30 -- versus 10 in 2008. PwC expects that distressed focused private equity funds and well-capitalized strategic buyers will continue to seek out desirable distressed acquisition targets at attractive valuations throughout 2010 -- particular interest likely to be seen in cash-flow generating sectors such as Broadcasting, Cable, Casinos & Gaming and certain Publishing businesses.

PwC's report also includes an analysis for the following sectors:

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The analysis identifies several other key trends impacting the E&M industry and deal market:

• Corporate E&M deal activity returns to the forefront. As expected, well-capitalized strategic buyers dominated E&M deal activity in 2009, with $70.6 billion (or 91% of total deal value) in completed deal value (versus 57% in 2008).
• Companies across E&M are establishing themselves on new media. Companies spanning music, film, and publishing made headway in 2009 to capture some of the value being generated through online and mobile media. With spending in these sectors expected to increase at 9.2% compounded annually through 2013, as estimated in PricewaterhouseCoopers Global Entertainment and Media Outlook, we anticipate greater deal activity focused on new media from these companies.

For a copy of the 2010 PwC TS US E&M M&A Insights report, visit www.pwc.com/ustransactionservices.

This report represents a comprehensive analysis of the evolving E&M transaction arena.  The Firm based findings on research provided by industry-recognized sources, including Thomson Reuters and  PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2009–2013. Dealmakers in the E&M sector may find the analysis insightful and useful as they evaluate the E&M deal environment over the next 12 months.

The PricewaterhouseCoopers Transaction Services practice provides due diligence for M&A transactions, along with advice on M&A strategy and integration, restructuring, divestitures and separation, valuations, accounting, financial reporting, and capital raising. With approximately 1,000 deal professionals in 16 cities in the United States, and a global network of over 6,000 deal professionals in 90 countries, experienced teams are deployed with deep industry and local market knowledge, and technical experience tailored to each client's situation. The Transaction Services team can be involved from strategy to integration and employ an integrated business approach to uncover the realities of a deal. The field-proven, globally consistent, controlled deal process helps clients minimize their risks, progress with the right deals, and capture value both at the deal table and after the deal closes. For more information, visit www.pwc.com/ustransactionservices.

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SOURCE PricewaterhouseCoopers LLP