Mergers and acquisitions are doing well in tech, less so in the media
For 5 years, the number of mergers and acquisitions carried out in the media and new technologies sector has increased by 60%, according to the study “Trends in Digital Media and Frontier Technologies M&A” produced by Mergermarket, a research firm specializing in mergers and acquisitions. Transaction values have multiplied by 2.5, from $ 206 billion in 2011 to $ 508 billion in 2015.
In the first half of 2016, this buyout trend slows down in these two sectors: the number of transactions recorded is down, lower than the first half of 2014 and 2015. The value of transactions, if it is down compared to the levels observed in 2015, remains despite everything much higher than it was in 2014. The study, carried out among around a hundred media and technology professionals around the world, deciphers the major trends of the phenomenon.
Sharp slowdown in media mergers and acquisitions
Another observation is that the number of mergers and acquisitions transactions in the media sector has actually fallen since the first half of 2015, with an acceleration in the first half of 2016 (-12% compared to the same period in 2015). The growth observed in 2016 therefore comes solely from operations carried out in the technology sector. These also started to decrease at the beginning of 2016.
In terms of transaction value, after two semesters of strong growth in the media sector (+ 68% in H1 2015 and + 113% in H2 2015), the start of 2016 was marked by a decline of around by 26%, compared to the same period in 2015. The technology sector saw the value of its transactions double in the first half of the year between 2015 and 2016.
Digital media, prime targets for buyers
Beyond these purely quantitative data, the authors of the study sought to determine which sectors of activity were of most interest to buyers in the market. Half of the respondents being dealmakers (investment banks, private equity, venture capital), Mergermarket asked them which sectors they planned to focus on in the next 12 months.
It is the service companies specializing in digital media that come first, with 51% of dealmakers who say they are interested, followed by companies in advertising and marketing (37%). 30% of dealmakers are also interested in digital content producers, and 28% are interested in digital content publishers, as well as video distributors. Live streaming tools only interest 13% of dealmakers, artificial intelligence 7% of them, and augmented / virtual reality barely 5%.
However, differences appear depending on the regions considered: in China, 24% of investors are interested in gaming companies, and 20% in e-health, live stream and IoT. In the United States, 30% of investors are interested in social media platforms. In Europe, e-health and video distribution are of equal interest to investors (20%).
Europeans place their interests
The main motivations for acquiring a company in one of these sectors are of course to position themselves in new markets (for 51% of respondents), and to get hold of strategic technologies and patents (47%).
Just over a quarter of respondents (28%) also believe that it is a good way to be among the first to position themselves in an emerging market, and 20% adopt this strategy to use their available cash. Finally, 14% believe that it is a means of obtaining new data concerning their market or their customers.
Note, European respondents are more in the logic of financial investment than in the other areas studied, and 20% of Chinese respondents believe that acquiring a company sends a strong signal to its market.
Buyers favor their domestic market
Unsurprisingly, the dealmakers favor mergers and acquisitions in their home market. 63% also say they are interested in target companies located on the same continent, and 42% target companies around the world.
More surprisingly, almost half (49%) of respondents say they are interested in companies located in Scandinavia. 38% are targeting companies based in the UK, and 31% are targeting companies in South East Asia, or India. It would be interesting to know the geographical distribution of European respondents, in order to better understand the score for Scandinavia.
Finally, very few buyers say they are ready to acquire a business for more than $ 200 million, and almost three-quarters are targeting deals between $ 25 and $ 50 million.
** Methodology: study carried out among 100 senior executives in the third quarter of 2016. 50% of respondents are located in the United States, 25% in Western Europe and Scandinavia, and 25% in China. Finally, half of the respondents are corporate, and the other half are partners in private equity funds, venture capital investors, or even investment bankers.
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