NEW YORK, May 25, 2016 /CNW/ -- Despite wavering confidence in the economy, 45% of media and entertainment (M&E) executives expect to actively pursue acquisitions in the next 12 months, according to EY's 14th biannual Media & Entertainment Global Capital Confidence Barometer (CCB). When asked their perspective on the state of the global economy, 84% of executives said they expect stability or modest growth in the next 12 months, with none anticipating strong growth, down from 23% just six months ago.
As companies continue to seek growth opportunities, the deal market remains solid. Sixty-six percent of executives are confident in the number of acquisition opportunities available and 43% expect the M&A market to improve in the year ahead.
John Harrison, EY Global Media & Entertainment Leader, Transaction Advisory Services, says:
"M&E executives recognize that, in the next year, the global economy is going to be unexciting at best, so they are having to look outside their base business for growth. We're seeing plans for bold organic and inorganic strategic moves — bigger deals in focus, new types of alliances and cross-sector investments, and increasing cross-border acquisitions — to accelerate growth and drive value in a subdued economic environment."
Companies considering M&A to drive growth are shifting their focus to bigger acquisitions than they did six months ago — 32% of M&E respondents are targeting a deal size above US$250 million, compared to 22% in October. In addition, to support an active M&A program, companies must maintain a robust deal pipeline. The report shows that 76% of executives are evaluating at least two deals today and 45% are evaluating three or more.
M&E executives are also actively looking toward international expansion, with 78% planning to pursue cross-border acquisitions during the next 12 months. The UK and US are the top two investment destinations, followed by France, Canada and China.
Distressed asset sales will have a greater influence on M&E transaction activity, with 42% of respondents saying these deals will become more prominent in the next 12 months. Companies are conducting strategic and financial reviews to reposition themselves for success in the current environment, often with a view to selling underperforming assets or, potentially, the entire business.
Digital remains at the core of the M&E strategy and continues to dominate growth plans and the boardroom agenda. Forty-eight percent of executives have seen the impact of digital technology on the business model elevated on the boardroom agenda and 56% expect to make better use of digital, technology and analytics to drive growth.
Harrison says: "Sector convergence, digital disruption and changing customer preferences continue to impact the M&E landscape. New competitors are gaining share, leading to uncertainty about the long-term viability of well-established and profitable M&E business models. In response, M&E companies are pursuing cross-sector targets to acquire new content or distribution capabilities, or both. At the same time, the strategic, operational and financial benefits of increasing scale are motivating an ongoing wave of horizontal consolidation across the sector."
For a full copy of Media & Entertainment Global Capital Confidence Barometer, visit ey.com/ccb/mediaentertainment.
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About EY's Global Media & Entertainment Sector
EY's Global Media & Entertainment Sector brings 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 collaborate and share knowledge around the world, to deliver exceptional client service and leverage our leading market share position to provide you with actionable information, quickly and reliably.Visit us at ey.com/mediaentertainment and follow us on Twitter @EY_MandE.
About EY's Global Capital Confidence Barometer
The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY's framework for strategically managing capital. The Barometer is a regular survey of senior executives from large companies around the world, from many industries, conducted by the Economist Intelligence Unit (EIU). In February 2016 and March 2016, we surveyed more than 1,700 executives in 45 countries. In this survey, we had 75 respondents from media and entertainment companies, of which 57% were CEOs, CFOs and other C-level executives. A full copy of the report is available at ey.com/ccb/mediaentertainment.
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