Page created by June Jimenez
H2: 2020

     MEDIA talk
ii    h2 2020   |   mediatalk                                                                               mediatalk   |   h2 2020   1

H2: 2020

                                      A WORD FROM ANDY VINER
                                      GLOBAL HEAD OF MEDIA AND ENTERTAINMENT
     GLOBAL M&A: OVERVIEW        4
     UK MEDIA M&A: OVERVIEW      10   Media in 2020 proved to be a remarkably resilient sector,
                                      buoyed in particular by increased demand for entertainment
     UK MEDIA M&A: HOT SECTORS   12   and related services. Globally, the value of media-related
     THE MEDIA PORTFOLIO         16   M&A topped USD $130 billion, a figure that underscored
                                      the market’s staying power in a remarkably difficult year.
     SPOTLIGHT ON THE US         20   And even though we saw a reduction in the number of deals
     LOOKING AHEAD TO 2021       25   announced in 2020, average deal values actually increased by
                                      around 14%.
                                      There was, of course, a significant divergence in how COVID-related
                                      restrictions affected different subsectors, with large numbers of
                                      companies directly vulnerable to lockdown policies and the newly
                                      cautious behaviour of consumers that went with them. While
                                      premiums were placed on assets and businesses with strong tech
                                      underpinnings and/or embedded data and digitalisation plans, deals
                                      targeting under-performing businesses were slower to materialise.
                                      Investors will now need to determine how to price in any necessary
                                      recovery period and the impact of corporate decisions taken to help
                                      businesses weather the storm.
2   h2 2020   |   mediatalk                                                                          mediatalk   |   h2 2020   3


That said, while revenue growth may be            that. With its attractiveness to overseas
slower initially through Q1, we anticipate        investors and potential to bounce back,
recovery to speed up over the rest of the         it made up a big chunk of all deals struck
year, and there could well be a shorter path      through 2020, both within the UK and
for M&A too. Globally, the media sector           globally. Many of these deals focused, as
retains significant upside potential, and deals   globally, on companies looking to add to
were noticeably picking up in H2 of 2020. PE      or enhance their digital reach and targeting
(private equity) has played a fundamental         capabilities.
role in keeping M&A rolling across the mid-
                                                  In the world of entertainment, meanwhile,
market, both in established areas of interest
                                                  content is still king, and the persistent
and in newer directions. PE houses recorded a
                                                  battles over streaming capabilities have
19% increase in activity over the second half
                                                  only strengthened the appeal of production-
of 2020, as compared with H1 2020.
                                                  related businesses. Digital publishing is also
US media deal activity slowed in 2020             seeing a steady flow of deals as PE and trade
compared to previous years, in the                buyers vie for the best brands and assets.
wake of recent historic market shifts.            Interactive gaming remains another space to
But the slowdown also created pent-up             watch.
demand to put cash to work and capture
                                                  So in 2021, we may not quite see a return to
new opportunities as consumer media
                                                  pre-COVID deal volumes just yet; there are
consumption habits change. The end of the
                                                  still too many uncertainties to resolve. But the
year brought a resurgence in ad spending,
                                                  stage is certainly set for another very active
which was a boost both to entertainment
                                                  twelve months…
companies and the media agencies that
develop and place ads. Signs point to a busy      We hope you find the latest edition
year for deal flow and investment in 2021.        of our report useful – do please
                                                  share your comments or feedback
In the UK, as around the world, few businesses
escaped unscathed from the pandemic’s
blanketing effect on the economy. But
pre-pandemic, the UK’s creative industries
contributed more than GBP £111 billion to
the UK economy, and the advertising and
                                                  ANDY VINER
marketing subsector made up a quarter of
                                                  Global Head of Media & Entertainment
4   h2 2020   |   mediatalk                                                                                                                                                                                                            mediatalk   |   h2 2020   5


2020 was a year with little relief for          UNITED STATES                                    To take one example, a consortium of           FIGURE 1: GLOBAL MEDIA M&A DEALS BY TOP TARGET REGION IN 2020
many businesses, as the pandemic                                                                 investors led by Swiss venture capital firm
                                                In the US, President Joe Biden’s celebrity-
coiled itself around markets and                                                                 Blue Horizon Corporation – and including
                                                studded inauguration bodes well for political
intermittently constricted activity. But                                                         Griffith Foods and PE backers Trustbridge
                                                stability after four rambunctious years,                                                                                           Latin America 1% Africa 0.3%
                                                                                                 Partners and EQT Partners – announced a                                           Middle East 1%
even if there is a bumpy road ahead to          but it may not be so auspicious for all. The
                                                                                                 USD $135 million investment in Livekindly.                                    Australasia 3%
recovery, we can see now that there are         tech sector, for one, is likely to come under
                                                                                                 Focused on sustainable, cruelty-free health            Central and Eastern Europe 4%
certainly blooming pockets of optimism,         renewed anti-trust scrutiny, and the new
                                                                                                 & beauty content, Livekindly has benefited                       Canada 5%
and exciting opportunities ahead.               administration looks ready to explore tax
                                                                                                 from heightened consumer interest in                                                                                                United States 31%
                                                changes that could target capital gains.
                                                                                                 environmentally-friendly products.                       South Asia 5%
Though the number of global media M&A           Both these developments could spur M&A
deals declined by 30% year-on-year in 2020,     activity: tax-rate increases could accelerate    The US began catching up significant
the second half of the year saw stronger        the completion of transactions, while            ground in the second half of 2020. Deal
volumes return across the Asia-Pacific and      corrective antitrust enforcement may force       volumes had diminished markedly in H1,            United Kingdom 8%
US markets, with relative spikes in September   the divestiture of certain brands or assets.     but we saw a spurt of acquisitions targeting
and December.                                                                                    US-based companies in Q3 and Q4, and
                                                The US remained top of the list of regions
                                                                                                 PE activity lifted investment in the mid-
Contrary to some expectations, the pandemic     for both targets and acquisitions in 2020.
                                                                                                 market. Crestview Partners, for example,
has not led to a complete paradigm shift.       Though other geographies have become more
                                                                                                 set its sights on a future rebound for in-
Rather, it has simply accelerated existing      active in the media sector, contributing to
                                                                                                 person events by committing USD $135
long-term trends, which in fact should          a slight fall in the US share of overall deals
                                                                                                 million to Viad Corp, an Arizona-based               Western Europe 16%
provide a measure of confidence from a          since 2018, its status as a global powerhouse
                                                                                                 provider of event marketing services.
strategic perspective. True, many sectors       remains undiminished. In 2020, 30% of
may be feeling the pressure to fast-track       global acquisitions targeted American                                                                                                                             Asia Pacific 26%
digital transformation, but these adjustments   companies, while 29% of global buy-side
will remain relevant well beyond lockdown.      deals originated in the US. Deals led by
In economic terms, the vast spending            American buyers fell by half (50%) in 2020
programmes and monetary policies now            on the previous year, but deals targeting US
in play around the world are likely to keep     companies fell by a relatively modest 30%,
                                                demonstrating the market’s persistent allure                                                    THE US STAYED TOP FOR DEAL SHARE WITH 31%, WHILE ASIA-PACIFIC PICKED UP SHARE ON
interest rates at basement levels for some
                                                against even the most difficult of backdrops.                                                   2019, AND WESTERN EUROPE AND UK SAW THEIR SHARES DECLINE.
while yet – always a positive for investors.
6   h2 2020   |   mediatalk                                                                                                                                                                                                                                                            mediatalk   |   h2 2020   7


ASIA PACIFIC                                                                                                                                        WESTERN EUROPE (EXCLUDING UK)                   FIGURE 2: GLOBAL MEDIA M&A DEALS BY TOP ACQUIRER REGION IN 2020

The Asia Pacific saw its share of global deal    The speedy rollout of impressive test-and-      By contrast, China’s share of global deals has     M&A activity in Western Europe also picked
volumes remain steady over the second            trace systems in South Korea and Japan in H1    shrunk over the past couple of years, along        up marginally in the second half of 2020,                                                          Latin America 0.4%
                                                                                                                                                                                                                      Middle East and Gulf Region 1%
half of 2020. Though year-on-year deal-          may well have benefited M&A activity later      with the amount of venture capital invested        even if global deal volumes still slipped
                                                                                                                                                                                                                    Central and Eastern Europe 2%
making declined here as everywhere else,         in the year: both countries recorded a higher   into the market since 2018. Helping to fill that   on 2019. The region saw 16% of deals on
Asia Pacific improved its proportion of global   volume of overall deals than the UK. Japan      space, Tencent led a Series B funding round        the buy-side, a 3% reduction on 2019. Its                                  Australasia 4%
deals as both a target and acquirer region       led the way, both as an acquirer and target     of USD $100 million for Versus Programming         share of global deal volume as an acquirer                          South Asia 5%
for the year – by 3% (to 26%) and 2% (to         country, with a shifting around of publishing   Network (VSPN) in October. The investment          region fell by just 1%, to finish the year                                                                                  United States 29%
29%) respectively. As with previous years,       assets. But South Korean production and         will help further VSPN’s ambitions to grow the     with 17% of global deals by volume.                            Canada 6%
deals were primarily domestic, some intra-       entertainment was also on the up: two           reach of esports around the world by creating
                                                                                                                                                    There were a slightly higher number of intra-
regional; but 7% of acquisitions made by         of the bigger 2020 deals involved South         a dedicated institute and culture park.
                                                                                                                                                    regional deals, compared to other regions.
Asia-Pacific companies targeted the US.          Korean music giant Cube Entertainment                                                                                                                  United Kingdom 7%
                                                                                                                                                    Cross-border transactions fell largely within
                                                 and content producers Fantagio, which
                                                                                                                                                    EU boundaries, though a minority reached
                                                 swapped out majority investors during H1.
                                                                                                                                                    out to the US, the UK, the Middle East and
                                                                                                                                                    Africa. Germany and France vied for top
                                                                                                                                                    target country, and the Nordic countries also
                                                                                                                                                    contributed notably to the overall tally.
                                                                                                                                                    In December, UK-based PE firm Inflexion               Western Europe 17%
                                                                                                                                                    Private Equity Partners announced a
                                                                                                                                                    tender offer for all outstanding shares of
                                                                                                                                                    Norwegian trading and market data provider,
                                                                                                                                                    Infront. The offer, which values Infront at                                                                     Asia Pacific 29%
                                                                                                                                                    more than EUR €250 million, will provide
                                                                                                                                                    the company with capital to support its
                                                                                                                                                    growth ambitions through potential future
                                                                                                                                                    transactions. Sweden came second only to
                                                                                                                                                    Germany as top acquirer with a flurry of        THOUGH THE US SAW MOST DEALS AS ACQUIRER REGION, ACTIVITY OVERALL DECLINED.
                                                                                                                                                    deals. These included Stockholm-based digital   THERE WERE INCREASES FOR THE ASIA PACIFIC, CANADA AND SOUTH ASIA.
                                                                                                                                                    agency Knowit’s acquisition of Norwegian
                                                                                                                                                    consultancy Creuna for EUR €17.2 million.
8   h2 2020   |   mediatalk                                                                        mediatalk   |   h2 2020   9


UNITED KINGDOM                                   OTHER REGIONS
In H1, the UK’s share of global deals remained   Canada and South Asia – which includes India
consistent year on year, though continuing       and Pakistan – each reported 5% of global
struggles in H2 and a third lockdown in          deals as a target region. While that represents
November hampered M&A. The UK concluded          a marginal dip on 2019 for South Asia, Canada
2020 with 7% of all buy-side deals by            increased its share of sell-side deals by 3%
volume, roughly half targeting domestic          (to 6%), boosted by an especially busy H1.
acquisitions, followed by Western Europe
                                                 South Asia recorded 5% of global deal volume
and the US. Along with other established
                                                 as an acquirer region, with India’s thriving
players the UK has lost some ground as
                                                 market and growing media consumption a
emerging markets continue to strengthen
                                                 big part of that success. In December media
their position in the global media space.
                                                 giants Microsoft and Google, alongside
The UK remains an obvious draw to overseas       investors Sofina SA, Falcon Edge Capital
investors, even if logistical difficulties and   and Lupa India, acquired an undisclosed
a combination of pandemic and Brexit-            stake in Dailyhunt, an India-based provider
related uncertainty led to a drop-off in         of news and digital book applications, for
activity. Global deals as a target region        approximately USD $100 million. Since
fell by 2% (to 8%). The decline is likely to     its founding in 2009, Dailyhunt has raised
be temporary, however, more a matter             almost USD $320 million from investors,
of the surrounding context than a lack of        including a handful of PE backers.
confidence in the UK media market itself, and
UK companies are likely to find themselves
in greater demand as 2021 progresses.
10       h2 2020   |   mediatalk                                                                                                                                                                                                                                             mediatalk   |   h2 2020 11


In line with the global downturn, UK media transactions declined by roughly 38%
in 2020 year-on-year. Underlying that figure, however, is the fact that deals held
up reasonably well through the latter part of the year. Though announcements fell
relatively silent in August, a final flurry in December buttressed overall volumes.

FIGURE 3: UK M&A VOLUMES AND VALUES (MEDIA SECTOR 2004-2020)                                                                                                                                       Against a backdrop of unprecedented
                                                                                                                                                                                                   economic disruption, we saw the lowest
                                                                                                                                                                                                   number of media M&A deals since
         180                                                                    Number of deals              Value of deals (£m)         50,000                                                    we began tracking the metric back in
                                                                                                                                                                                                   2004. In fact, only the financial crisis of
         160                                                                                                                             45,000                                                    2009 had a comparable impact on deal
                                                                                                                                                                                                   flow, when the threat of shrinking credit lines
                                                                                                                                         40,000                                                    massively hindered M&A activity.
                                                                                                                                                                                                   When it comes to M&A in 2021, however, there are
         120                                                                                                                                                                                       already grounds for cautious optimism. For one thing,
                                                                                                                                                                                                   Brexit is no longer an impending reality; the fact of a deal,
                                                                                                                                         30,000                                                    despite its shortcomings, provides much-needed clarity for most
                                                                                                                                                  Value (GBP m)

                                                                                                                                                                                                   businesses. The vaccine rollout, a clear success so far, will hopefully

                                                                                                                                         25,000                                                    foster a sense of optimism and enable businesses and consumers
          80                                                                                                                                                                                       alike to begin looking ahead with more confidence.
                                                                                                                                                                                                   And, as in the US, the UK Government will be looking at potential
          60                                                                                                                                                                                       tax changes – including around Capital Gains Tax. This will be of great
                                                                                                                                                                                                   interest to investors – while deal flow may not return to pre-COVID
          40                                                                                                                                                                                       levels immediately, the coming year is likely to see active investors
                                                                                                                                                                                                   and businesses look to M&A as a means of reclamation.
          20                                                                                                                                                      TRANSACTIONS SAW A SIGNIFICANT
                                                                                                                                                                  DECLINE IN AN UNPRECEDENTED
           0                                                                                                                             0                        LOCKDOWN.
12   h2 2020   |   mediatalk                                                                                                                                                                                            mediatalk   |   h2 2020 13


Taken together, advertising and              As businesses trimmed their budgets in           approach to development as well as               As consumers around the world were forced        Archant, the UK’s fourth-largest local-
marketing services made up the               2020, it was a challenging year for the          contributing to geographical reach. S4           to stay in, and the streaming wars raged         newspaper publisher with a 150-year history,
largest media subsector for M&A              likes of ad-agency giants WPP, Omnicom,          has kept the momentum up into the                on, demand for content remained strong.          felt the full force of this transition in 2020,
deals in the UK in H1 2020. Though           Denstu and Publicis. Not only that, but          New Year, with the announcement of                                                                as it sought financial support in the form of
                                                                                                                                               Silverback Films, a leading UK natural-history
                                             the ongoing challenge from creative              two takeovers in the first week of 2021:                                                          a Company Voluntary Agreement (CVA) to
deal making slowed in the second half                                                                                                          producer responsible for the landmark
                                             consultancies and digital-first offerings like   Decoded, a New York-based creative                                                                continue its operations. Rcapital acquired
of the year, the two still accounted                                                                                                           Netflix series Our Planet, was acquired by
                                             S4 Capital kept the viability of the holding     agency will be merged with MediaMonks,                                                            a 90% stake in Archant in September for
for 28% of media M&A overall.                company model under investor scrutiny.           while San Francisco-based Metric Theory
                                                                                                                                               All3Media for an undisclosed fee in December.
                                                                                                                                                                                                an undisclosed fee, and was joined by the
                                                                                                                                               Silverback Films will sit alongside over 40
For advertisers to cope with uncertainty                                                      will become part of MightyHive.                                                                   Pension Protection Fund, which absorbed the
                                             S4 came into 2019 on the back of a wave                                                           other production and distribution companies
they need the flexibility to efficiently                                                                                                                                                        pension liability, reportedly GBP £50 million,
                                             of acquisitions and just kept on going,          Though big agencies will continue to rely        in All3Media’s portfolio. In the same month,
measure, target, and adapt messaging, so                                                                                                                                                        plus the remaining 10% share of the business.
                                             despite the logistical issues thrown up by the   on scale in order to compete, WPP has also       Discovery Communications, which acquired
many deals unsurprisingly focused on the                                                                                                                                                        The deal means Archant can continue to
                                             pandemic. In September, S4’s content arm         looked to spin-offs (as with 2019’s Kantar       All3Media in a 2014 joint venture alongside
ability to generate timely content and/or                                                                                                                                                       operate while affording its creditor some
                                             MediaMonks announced that it had acquired        deal) and potential divestments as part of       Liberty Global, announced the launch of a
enhance programmatic capabilities. Late in                                                                                                                                                      breathing-space, but it highlights the parlous
                                             Dare.Win, an award-winning Parisian digital      its strategy. But acquisitions are still part    new streaming service Discovery+. Having
the year, for example, two award-winning                                                                                                                                                        state of local newsprint media, a condition
                                             creative agency. Dare.Win counts some big        of the plan: in September, for example,          produced films for Discovery in the past, the
independent programmatic agencies                                                                                                                                                               only exacerbated by the pandemic.
                                             names among its clientele, and the deal will     Wunderman Thompson (a WPP agency itself          deal secures access to more content for the
came together as US-based Kepler Group       expand MediaMonk’s geographical reach into       formed in 2018 by consolidating two other        new streaming platform in years to come.         No surprise, then, that the future of
announced the acquisition of UK Infectious   Europe’s third-largest advertising market.       WPP agencies) announced the acquisition                                                           publishing looks set to depend on the
Media for an undisclosed consideration.                                                                                                        The drop in ad revenue wasn’t just bad news
                                                                                              for an undisclosed amount of France-based                                                         converging paths of digital transformation
                                             Only days earlier, S4’s programmatic wing                                                         for advertisers. Media companies reliant on
In October, digital agency Jellyfish Group                                                    Velvet Consulting. The latter’s expertise                                                         and consolidation. Regional owners such as
                                             MightyHive announced its acquisition of                                                           advertising spend, including news publishers,
announced two acquisitions to expand its                                                      in multichannel consumer engagement                                                               JPI Media have launched digital acceleration
                                             UK-based analytics consultancy BrightBlue.                                                        were also forced to tighten their belts. Print
Latin American presence. Reamp and San                                                        demonstrates WPP’s commitment to                                                                  programmes to begin the process of
                                             Around the same time MightyHive also                                                              advertising was especially hard-hit globally,
Pancho, acquired for undisclosed amounts,                                                     enhancing its own digital capabilities.                                                           converting their print titles, following
                                             acquired Amazon agency Orca Pacific,                                                              falling by 25% in the year according to
are data-driven players that will enhance                                                                                                                                                       the success of digital-only titles like The
                                             enhancing an already well-established            Broadcasting and content accounted for 27%       GroupM. It was especially tough on traditional
Jellyfish’s programmatic capabilities as                                                                                                                                                        Independent, which grew revenue by 12%
                                             relationship with Amazon. All deal values        of all media transactions in 2020, boosted       newsprint in the UK, which was already
well as provide greater market access.                                                                                                                                                          in 2020. The Independent embraced digital
                                             were undisclosed, but follow S4’s pillared       by a slew of deals announced late in the year.   fighting waves of increasing digitalisation
                                                                                                                                                                                                early, and appears to be reaping the rewards.
                                                                                                                                               and changing habits in news consumption.
14 h2 2020   |   mediatalk                                                                                                                                                        mediatalk   |   h2 2020 15


At this point, consolidation looks like a       FIGURE 4: UK MEDIA M&A TRANSACTIONS BY SUBSECTOR 2020                           Events management unsurprisingly felt the
structural necessity. Traditional publishing                                                                                    full force of the COVID-19 outbreak. But early
is already a capital-intensive realm and                                                                                        in the year, SMi Group, a company specialising
substantial capital is required to undertake                                                                                    in global events for the aerospace, defence
digital transformation. Early in 2020,                                         Events management 2%                             and pharmaceutical sectors, was acquired by
struggling owner JPI Media – the UK’s third-                                                                                    US-based SAE International, a professional
largest regional newspaper publisher – had                   Marketing services 10%
                                                                                                                                association for engineers which operates
suggested that it was no longer in search                                                                                       internationally. Financial details of the deal,
of a buyer, though it continued to divest                                                                     Broadcasting      which allowed SAE international to merge SMi
assets: in October, Daily Mail and General                                                                    and content 27%   Group with its publication arm, Tech Briefs,
Trust (DMGT) acquired its printing operations                                                                                   were not released.
in Dinnington, Portsmouth and Carn.
                                                    Digital media 18%                                                           Later on in 2020, deals were thin on the
But then, at the very end of the year,                                                                                          ground in the events space, though some
National World, a takeover vehicle headed                                                                                       buyers continued to build their portfolio.
by previous Mirror Group chief executive                                                                                        In November Pageant Media, a provider
David Montgomery, announced that it had                                                                                         of global business information and events,
acquired JPI Media for around GBP £10.2                                                                                         acquired Falk Margues Group, a conference
million. National World has set its sights                                                                                      and networking company specialising in
on developing a ‘sustainable local online                                                                                       promoting the advancement of women in the
news publishing model’ that will benefit                                                                                        private equity, venture capital and alternative
not only from JPI Media’s long-established                                                                                      investment worlds. Financial details were not
brands but also from its prior efforts in                        Advertising 18%                        Publishing 25%          disclosed.
digitalising a handful of top titles.
                                                                                                                                For events management, the acceptability of
                                                                                                                                large gatherings in a post-vaccine world will
                                                                                                                                determine the rate at which the sector as a
                                                                                                                                whole can return to growth in coming years.
                                                BROADCASTING AND CONTENT M&A PICKED UP IN H2 2020, JUST AHEAD OF PUBLISHING.
                                                MARKETING SERVICES AND ADVERTISING COMBINED ACCOUNTED FOR 28% OF ALL DEALS.
16   h2 2020   |   mediatalk                                                                                                                                                                                                          mediatalk   |   h2 2020 17

THE MEDIA PORTFOLIO                                                                                                                                                                       THE MEDIA PORTFOLIO
                                                                                                                                                                      PE’S LOVE-IN WITH ADVERTISING AND MARKETING

Even private equity – no stranger to risk                                                                In many ways, and with a few notable exceptions, the advertising and marketing
– was not entirely immune to the unique                                                                  world has not historically been a natural ecosystem for PE to thrive. Businesses
challenges of 2020. Deal volumes show                                                                    that rely on the vagaries of creativity, with talent locked up in individuals, may
the vacuum effect that the pandemic                                                                      look a little too risky for the PE mindset, which tends to prefer more robust
had on M&A. And yet, PE remained                                                                         models offering predictable revenues and greater accountability, such as
active in discussions around prospective                                                                 subscription-based platforms and software.
deals, and global activity picked up
significantly in H2 – in fact, the number                                                                But advances in programmatic modelling,           deal focused on enhancing data capabilities,
                                                                                                         digitisation and global scalability have          following Norvestor’s acquisition of
of global PE-related deals increased by
                                                                                                         combined to make advertising and marketing        a 60% stake in CapMan in 2018.
19% in the second half of the year.                                                                      much more attractive to PE houses. PE
                                                                                                                                                           In March, US-based PE firm Clayton, Dubilier
PE proved resilient in an extraordinary year                                                             houses are attracted to advertising’s
                                                                                                                                                           and Rice (CDR) announced its intention to
dominated by the need to provide liquidity to                                                            increased strategic capability to measure
                                                                                                                                                           take healthcare and communications group          a platform for further M&A activity as
portfolio companies and find effective ways to                                                           and track effectiveness via data-driven
                                                                                                                                                           Huntsworth private through a recommended          Fishawack acquired US-based consulting firm
assess value. Fewer exit routes meant a relative                                                         decision-making, witness Blackstone Group’s
                                                                                                                                                           cash offer. The deal completed in May for circa   Skysis in April. It then went on to consolidate
spike in secondary buy-outs (SBOs), but PE again                                                         December acquisition of US-based marketing
                                                                                                                                                           GBP £575 million. Aimed at strengthening          further with the acquisition of healthcare
played a leading role in driving acquisitions.                                                           optimisation platform, Liftoff, in a deal
                                                                                                                                                           Hunstworth’s offering in the medical space,       communications business Hive, including
Deal flow will take some time to rebound as the                                                          estimated to be around USD $400 million.
                                                                                                                                                           the new backing allowed Huntsworth to             its US-based subsidiary, from Kin and Carta
pace of recovery, regulatory risks and changing                                                          As a result, even in this COVID-hit era, many
                                                                                                                                                           embark on its own acquisitions later in 2020,     in December, for GBP £13.8 million. This
demands continue to confound expectations.                                                               businesses focused on social media, digital
                                                   And digital sports platform DAZN Group entered                                                          including of Nucleus Global and Cormis            deal provided debt alleviation for Kin and
                                                                                                         advertising and publishing are delivering the
Buy-and-build deals remained on pace from          into talks with TPG Capital in the summer around                                                        Partnership, both medical industry specialists.   Carta, allowing it to focus on becoming
                                                                                                         sort of strong multiples and profitability that
previous years, demonstrating the value            the possibility of selling a significant stake in a                                                                                                       an integrating technology platform.
                                                                                                         PEs look for. More recent subscription options    The management buyout (MBO) of medical
placed on digital content and health-related       number of its brands. In September, Integrated
                                                                                                         have increased the appeal of publishing           communications agency Fishawack in                MSQ Partners, the international marketing
offerings in 2020. H2 saw a clutch of buy-and-     Media Company (IMC), a portfolio company
                                                                                                         and programming too, whilst retaining a           April highlighted two trends of 2020: the         communications group backed by LDC,
builds, including Arsenal Capital’s takeover of    of TPG Capital dedicated to digital media,
                                                                                                         premium on creativity and inventiveness.          contextual premium placed on health-related       acquired publicly-listed advertising company
healthcare communications firm Cello Health        announced the acquisition of a majority stake
                                                                                                                                                           media, and the rise of SBOs. Bridgepoint          Be Heard Group for GBP £6.2 million in June,
PLC via Pharma Value Demonstration for a           in three online sports news brands from DAZN          Communications firm North Alliance
                                                                                                                                                           Advisors supported the existing management        in a deal designed to enhance MSQ’s tech and
recommended cash offer of GBP £178.8m.             Group –, SPOX Media and Voetbalzone.         (NoA), a portfolio company of Norwegian
                                                                                                                                                           in an MBO valued at GBP £240 million. It          data analytics offerings. Providing these new
                                                                                                         PE house Norvestor Equity, acquired
                                                                                                                                                           was the end of a fruitful era of growth for       capabilities can be effectively implemented
                                                                                                         Swedish consultancy Peregrine in August.
                                                                                                                                                           UK-based PE firm, LDC, which had previously       across MSQ’s global offices, management are
                                                                                                         Peregrine’s digital-first approach will be
                                                                                                                                                           supported an MBO in 2017 for GBP £38              hopeful the deal will lead to the acquisition
                                                                                                         crucial in supporting NoA’s data-focused
                                                                                                                                                           million. Bridgepoint’s investment provided        of larger clients, more frequently.
                                                                                                         development plans. This is NoA’s second
18   h2 2020   |   mediatalk                                                                                                                                                                                                 mediatalk   |   h2 2020 19

THE MEDIA PORTFOLIO                                                                                                                                                                 THE MEDIA PORTFOLIO
BACKING CONTENT                                                                                                                                                                                       SINGING A DIFFERENT TUNE

With the proliferation of devices and               (C3M) for an undisclosed sum. The deal                                                            With growing supplies of dry powder, PE         The scale of the opportunity is such that the
platforms, and restrictions forcing                 will make Framestore the world’s second                                                           firms have been looking for more creative       big PE players all appear to be entertaining
viewers to spend more time at home,                 largest visual effects company by headcount,                                                      ways to deploy capital, and with the rise       the chance to invest in Germany’s top
                                                    adding 3500 artists, engineers and experts to                                                     of subscription services, music copyrights      football league, the Bundesliga, as it maps
global consumption of video and TV
                                                    Framestore’s 2500 existing employees.                                                             have become highly sought after. Music-         out plans for a global pay service. Reports
continues to rise. Even though filming
                                                                                                                                                      investment company Hipgnosis acquired a         suggest the league is open to selling a stake
of new shows and films ceased for                   In July, Moonbug Entertainment, a creator of
                                                                                                                                                      50% stake in the publishing interests of Rick   in the range of EUR €200m to €300m. It will
much of the year, post-production and               children’s shows distributed across numerous
                                                                                                                                                      James in November, and made an early deal       only be a matter of time before other leagues
virtual effects companies worked on                 streaming platforms, received USD $120
                                                                                                                                                      in 2021 for stakes in the interests of Jimmy    follow suit, and Italy’s Serie A is already
through the lockdowns. By working                   million in funding from a consortium of
                                                                                                                                                      Lovine, Lindsey Buckingham and Neil Young.      under pursuit.
remotely through connected equipment                private equity backers led by Goldman Sachs
                                                                                                                                                      Earlier in 2020, Stevie Nicks and Bob Dylan
                                                    Growth Equity. The deal follows an initial
and practising social distancing where                                                                                                                each sold a significant stake in their back-
                                                    USD $145 million round of investment by
possible, the subsector was able to stay                                                                                                              catalogue to Primary Wave and Universal
                                                    many of the same players in December 2018.
active despite the disruption.                                                                                                                        Music Group respectively.
                                                    The Series B announcement in July coincided
As content has become an increasingly               with Moonbug announcing the acquisition                                                           PE firms are also looking at leveraging
popular commodity, PE has strengthened its          of two US-based children’s entertainment                                                          the growth of OTT subscription services
foothold in the world of TV and film too. As        companies, Blippi and CoComelon.                                                                  in the sporting world. Of course, sports
in the publishing realm, access and scalability     CoComelon alone boasts over 3.5 billion                                                           is not a completely new environment for
are critical considerations for investors looking   online views a month.                                                                             PE – European PE investor CVC Partners,
to take advantage of popular titles matched                                                                                                           for example, was an early mover that held
                                                    Digital publishing also proved a hot
with efficient distribution capabilities and                                                                                                          a stake in Formula One for a decade. It has
                                                    marketplace amongst PE firms, with special
audience access.                                                                                                                                      also acquired a minority stake in English
                                                    interest, education and technology-focused
                                                                                                                                                      Premiership Rugby and is in the mix for a
In November, PE firms Aleph Capital and             brands all attracting investment. Red Ventures   Metacritic, TVGuide, ZDNet and Chowhound,        reported share of GBP £300 million in the
Crestview Partners acquired Framestore, a UK-       – a portfolio company of General Atlantic        will help ViacomCBS to level its balance sheet   Six Nations Rugby tournament, as well
based visual effects company that has worked        Service Company and Silver Lake Partners –       after its blockbuster merger. Only days after    as a EUR €1.6 billion investment in Italy’s
on many UK children’s entertainment titles.         made headlines when it acquired the popular      announcing this deal, Red Ventures expanded      Serie A football league, alongside Advent
It’s the third major investment in Framestore       digital media brand CNET from ViacomCBS          its digital content with acquisition of Lonely   International.
in the last six years, and enabled Framestore’s     for approximately USD $500 million. The deal,    Planet Global, the digital travel content
November acquisition of Company 3/Method            which includes CNET’s subsidiaries Gamespot,     publisher, for an undisclosed sum.
20 h2 2020   |   mediatalk                                                                                                                                                                                                                                        mediatalk   |   h2 2020 21

SPOTLIGHT ON THE US                                                                                                                                                                                                    SPOTLIGHT ON THE US

                             BUILDING THE MEDIA                                    DEAL OUTLOOK                                      DEAL DRIVERS                                      CONSUMER CHANGE                                   CONTENT
                             CONGLOMERATES OF THE FUTURE
                                                                                   In 2020, the US media and entertainment           Looking ahead, built-up demand coupled            Significant economic change inevitably            Ad-based streaming services have generally
                             US media deal activity slowed in 2020                 sector recorded 161 deals with disclosed          with strategic and investor interest bode well    leads to significant behaviour change; very       performed well but face a growing challenge,
                             compared to previous years. In the wake               financial terms worth some $60B in total          for a resurgence in media deals in 2021. And      quickly, some business models lose relevance,     as subscription services rise and competition
                             of recent historic market shifts, many                announced value, according to S&P Capital         already we can identify three major drivers       while others surge in demand. Quibi, for          increases. Consumers who wanted to cut
                             companies and investors opted to watch                IQ. Deal count declined 20% from 2019, but        of media and entertainment deal flow in 2021:     example, started the year as a hot platform       cords are close to burnout on the breadth
                             and wait for a shakeout before committing             this is consistent with COVID-led market                                                            for consumers on the go, offering short-form      of streaming platforms. The key now will be
                             to any big moves that might contribute                trends rather than a sign of any industry         CONSOLIDATION                                     content that differentiated it from other         content assets and the ability to differentiate.
                             to the media conglomerates of the future.             struggle.                                                                                           streaming platforms. But demand shifted           S&P Capital notes that Apple, Amazon and
                                                                                                                                     In 2021, media & entertainment companies
                             But the slowdown also created pent-up                                                                                                                     when the pandemic hit: the platform closed        AT&T, among others, are likely to continue
                                                                                   While CFOs forecast economic recovery and         will live or die on their ability to optimise
                             demand to put cash to work and capture                                                                                                                    in December, then sold its content to Roku in     the chase for in-demand media assets.
                                                                                   increased deal flow for this year, according to   and scale effectively. Independent studios
                             new opportunities as consumer media                                                                                                                       January. Looking ahead, we concur with S&P        Streaming music platforms also continue to
                                                                                   the 2021 BDO Technology CFO Outlook               and film & TV libraries will continue to be in
                             consumption habits change.                                                                                                                                Capital that many media companies will be         seek exclusivity following a year where many
                                                                                   Survey, there is uncertainty around what’s        demand by the streaming services, according
                                                                                                                                                                                       looking to divest no-longer-core assets, whilst   pivoted to provide live virtual concerts and
                             After a stall in the first half of 2020, the end of   likely to come out of Washington DC. With         to S&P Capital. Similarly, media agencies and
                                                                                                                                                                                       simultaneously bolstering their capabilities      other digital experiences.
                             the year brought a resurgence in ad spending,         a new administration and change of Senate         professional service firms will likely continue
                                                                                                                                                                                       across now-essential opportunities.
                             which was a boost both to entertainment               control, new regulatory and oversight issues      to merge and consolidate as they reorganise
                             companies and the media agencies that                 are coming to the fore. Consumer privacy          to address pandemic impacts and reduce            At the same time, online gambling surged
                             develop and place ads. Signs point to a busy          issues, though put on the backburner during       costs.                                            in 2020 as consumers spent more time in
                             year for deal flow and investment in 2021.            the pandemic, remain a bipartisan area of                                                           home-entertainment mode, and brick-and-
                                                                                                                                     Strategic deals will drive the vast majority
                                                                                   concern and are likely to be the subject of                                                         mortar businesses were forced to reimagine
                                                                                                                                     of media M&A in 2021, with private equity
                                                                                   new legislation in the next few years. Indeed,                                                      their spaces and offerings with new safety
                                                                                                                                     keying in on subscription-based revenue
                                                                                   for many companies, a standard set of privacy                                                       protocols and changing demand. This fact has
                                                                                                                                     models and other sectors where revenue
                                                                                   rules or guardrails may be welcome: some                                                            clearly had a beneficial impact on gaming
                                                                                                                                     growth is strong and stable. The resurgence
                                                                                   45% of CFOs think the industry needs more                                                           valuations, as demonstrated by the feverish
                                                                                                                                     of SPACs (special purpose acquisition
                                                                                   regulation, according to our survey. And                                                            bidding war for AIM-listed auto-racing game
                                                                                                                                     companies) in 2020 is likely to continue
                                                                                   no matter which issues take priority on the                                                         developer, Codemasters, involving bidders
                                                                                                                                     as they are increasingly seen as attractive
                                                                                   new President’s legislative agenda, media                                                           like US developer Electronic Arts (EA) and
                                                                                                                                     vehicles to facilitate some of the new year’s
                                                                                   companies considering a merger or acquisition                                                       Take-Two Interactive Software. The online
                                                                                                                                     industry consolidation.
                                                                                   will need to place appropriate emphasis and                                                         gaming industry is likely to continue to
                                                                                   value on information governance and sound                                                           grow as strapped state budgets look for new
                                                                                   data-ethics policies.                                                                               ways to expand tax revenues, and we expect
                                                                                                                                                                                       consolidation will drive deals in the gaming
                                                                                                                                                                                       sector as well.
22 h2 2020   |   mediatalk                                                                          mediatalk   |   h2 2020 23


HOT SECTOR: PODCASTING                              HOT VEHICLE: SPACs

Surging demand for content and                      SPACs surged as a vehicle for deals in 2020,
entertainment was a consistent trend in 2020        raising nearly $80 billion, up from $13.6
for consumers who spent more time at home           billion in 2019, according to Yahoo! Finance.
than ever before. That trend will carry into        In January, CNBC reported that a number
2021, and podcasting is one sector that is sure     of major media companies, including Group
to benefit. Podcast listeners have grown by         Nine Media, Bustle Digital Group, Vox, Vice
37.5% in just three years, according to Edison      and Buzzfeed, were in talks to consolidate
Research, and listenership has likely not yet       and then go public via a SPAC. With ample
peaked. On Apple’s platform alone there are         targets on the market, 2021 looks to be
1.75 million podcasts and counting.                 another big year for SPAC deals in the
                                                    media and entertainment sector. While
Streaming music giant Spotify is also seeking       this approach to scale is different than the
to be a leader in podcasting. In 2020, it signed    many mega-mergers seen in 2019, these
several major deals, including for The Ringer       new companies will contend with scrutiny in
($196 million), Gimlet Media ($230 million),        the public markets and will need to ensure
Anchor, Parcast and Megaphone, to bolster its       strong governance and financial reporting
content and enhance technology. Spotify also        compliance are priorities alongside growth.
inked exclusive deals with Joe Rogan ($100
million), Prince Harry and Meghan Markle            Though a relatively small portion of the SPAC
($54.5 million), the Kardashians and others.        funding targeted companies in the media
                                                    sector (around USD $4 billion), such vehicles
Similar to the streaming video platforms,           may well become more commonplace in the
exclusivity is a top goal for strategic deals due   world’s foremost media market. For example,
to the competition in the space. Podcasting         in October Mountain Crest Acquisition
is also likely to be an attractive market for PE    Corp announced its acquisition of notorious
investment, given that so many are built on         publishing and programming company
a subscription model and there is potential         Playboy Enterprises, a combined entity with
for licensing and royalty revenue on top of         an estimated market cap of more than USD
traditional ad sales.                               $370 million.
24 h2 2020   |   mediatalk                                                                                                                    mediatalk   |   h2 2020 25

                                                                                               LOOKING AHEAD TO 2021

                             On paper, the prospects for an M&A        To the extent that consumer spending           Investor trends could also make 2021 an
                             revival in 2021 look good. The pandemic   remains constrained in 2021, the amount        interesting year ahead, especially in the rise
                             has significantly accelerated remote      spent on interactive and at-home               of SPACs as funding vehicles. Though in the
                             working, ecommerce, digitisation          entertainment is likely to continue to         US, SPACs may eventually be limited by the
                             and online entertainment, and the         rise. Subsectors such as gaming and            lack of dedicated market and regulatory
                                                                       streaming content remain ones to watch         hurdles, the prospects for a number of
                             re-opening of economies should also
                                                                       as the big players fight to capture revenues   European markets may be more immediate,
                             lead to exciting comebacks for live                                                      meaning this could well be a space to watch.
                                                                       by responding best to demand.
                             entertainment and events management.
                                                                       While generally, media revenue growth          While the pandemic impacted different
                                                                       may be slower through Q1, we anticipate        sectors of the media and entertainment
                                                                       recovery to speed up over the rest of the      industry very differently, the common
                                                                       year, and there could well be a shorter path   denominator is change. Change in consumer
                                                                       for M&A too. A new approach to antitrust       behaviour, change in demand, change in
                                                                       and privacy regulation in the US could         platforms, and ongoing disruption will no
                                                                       precipitate M&A activity, for example, as      doubt fuel deal activity across each sector
                                                                       businesses look to re-organise to adapt        in 2021. So though we may not expect a
                                                                       to any statutorily enforced changes.           return to pre-COVID deal volumes just yet,
                                                                                                                      there is every chance of a strongly resurgent
                                                                       In the US and elsewhere, the end of the
                                                                                                                      – and hopefully less turbulent – 2021…
                                                                       year brought a resurgence in ad spending,
                                                                       which was a boost both to entertainment        Thanks for reading!
                                                                       companies and the media agencies that
                                                                       develop and place ads. As advertising
                                                                       and marketing models continue to de-
                                                                       risk and add scale through digitisation,
                                                                       there is every sign of a busy year for
                                                                       ahead for deal flow and investment.
for more information contact   This publication has been carefully prepared, but it has been written in general terms and should be seen as
                               containing broad statements only. This publication should not be used or relied upon to cover specific situations
our digital media experts      and you should not act, or refrain from acting, upon the information contained in this publication without
                               obtaining specific professional advice. Please contact BDO LLP to discuss these matters in the context of your
                               particular circumstances. BDO LLP, its partners, employees and agents do not accept or assume any responsibility
ANDY VINER                     or duty of care in respect of any use of or reliance on this publication, and will deny any liability for any loss arising
AUDIT PARTNER &                from any action taken or not taken or decision made by anyone in reliance on this publication or any part of it. Any
GLOBAL HEAD OF MEDIA           use of this publication or reliance on it for any purpose or in any context is therefore at your own risk, without any
                               right of recourse against BDO LLP or any of its partners, employees or agents.
+44 (0)20 7893 2373
                               BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member         of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO
                               network of independent member firms. A list of members’ names is open to inspection at our registered office,
                               55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Conduct Authority to
TONY SPILLETT                  conduct investment business.
TECHNOLOGY & MEDIA, UK         BDO is the brand name of the BDO network and for each of the BDO member firms.

+44 (0)20 7486 5888            BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate
                               within the international BDO network of independent member firms.
                               Copyright © February 2021 BDO LLP. All rights reserved. Published in the UK.

+1 212-885-7397 (Direct)
+1 917 981 7311 (Mobile)
You can also read