Trend 2018 – Acquisitions and Mergers

    This article is based on credible news stories from recent months and points are speculative based on personal opinion. 

    As part of our continued look at the news likely to dominate the media and entertainment sectors, Lumina takes a look at the rumour mill from 2017 and how it could pan out this year. The media industry is in a major period of consolidation and each year the mergers and acquisitions announced continue to break new records. As new services and businesses arrive on the scene, some causing disruption to the present, major players are acquiring businesses to consolidate their position.

    Of course, the Disney-Fox deal may not have been the biggest outlay for a media company in recent years. That honour falls to AT&T’s takeover of Time Warner, which has been thwarted by US Justice Department and looks set for a long legal battle. The Disney-Fox deal will likely have to go through the same investigations at the AT&T-Time Warner deal, however early indications suggest there is not that many huge obstacles for the takeover. On top of this, Disney’s CEO Bob Iger has been known to pull off several large takeovers, fully integrating them all into the Disney brand – Pixar, Lucasfilm, Marvel – but this deal far outweighs these smaller acquisitions. Plus, with all of the minority stakes Disney will acquire, there is a large number of potential deals lying in wait, including Hulu. Yet, there is still the Sky takeover by 21st Century Fox to consider and UK Newspaper The Guardian reported that the Competition and Markets Authority is expected to publish its initial findings later this month.

    At Lumina, we keep on top of the trends and industry news and some items have perked our interest on the topic. After the announcement in Summer, Discovery intended to takeover Scripps Networks and received shareholder approval in November 2017. News from this acquisition caused the rumour mill to kick into overdrive. In the UK, Scripps Network cooperate in a joint venture with BBC commercial arm to run UKTV. The news of Discovery’s acquisition led to stories reporting that the BBC eyed the opportunity to take full ownership of UKTV. In mid-November, The Telegraph reported that BBC Worldwide reached out to financial advisers to consider the possibility of buying out Discovery’s soon-50% share of UKTV. The UKTV Network has developed rapidly in recent years, with their distinctive channels driving a 24% revenue growth in three years. Its easy to see why BBC Worldwide is eager to fund a bid for UKTV.

    Should a deal of this magnitude in the UK television industry go ahead, it will be interesting to see the response from fellow broadcasters. The likes of ITV have been continuing their spending spree, snapping up stakes in more production companies in 2017. World Productions, behind BBC hit drama Line of Duty, plus stakes in major continental European producers were bought in 2017. This strategy appears to have been successful, with Studios revenue now generating over half of the group’s total revenue. As the TV advertising industry feels the squeeze, ITV is transitioning into a more production-based company and with more high-budget dramas in the pipeline, ITV could continue their spending spree.

    2018 will likely continue where 2017 left off, a series of large acquisitions, mergers and partnerships will likely occur.

     

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