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Advisors, Private Equity

Media Mania: 5 Trends Defining M&A in the TMT Sector

The big deal of the week was the announcement that Verizon will buy AOL for upwards of $4 billion. Even in the wake of a collapsed Comcast-Time Warner deal, many experts are predicting continued consolidation amongst large and mid-sized industry players. With $296 billion worth in deals, 2014 saw one of the biggest years in history for TMT deal activity, and 2015 is expected to be another strong year. Here’s a look at some of the biggest deals that have been inked thus far:

After the latest in a string of mega deals, it’s worthwhile to examine some of the broader trends driving heightened activity in the TMT sector.

Digital Has Its Day

Competition to address the priorities and preferences of a millennial customer base is manifesting itself in an industry-wide focus on digital and mobile when it comes to distribution, leading many traditional media players to scoop up their more agile internet peers. Traditional “triple play” packages are looking to add mobile as a fourth bundle offering and tapping into online properties – Verizon also adds AOL-owned The Huffington Post and TechCrunch with it’s purchase – is a major priority. Of course with buyouts this size, spin-offs are also a possibility and private equity interest has already surfaced in some of AOL’s most popular blogs.

One Stop Shop

The quickening convergence of technology, entertainment and media is forcing many to think about the fastest way to grow and many are opting to buy their way in rather than invest the money, time, and personnel to build it themselves. While the Verizon outlay for AOL is said to be but pocket change, mid-sized media companies should consider the strategic value  acquiring brands with a foothold in digital. At the same time, CEOs of digitally-focused media companies are seeing M&A activity and multiples rise, making 2015 an ideal time to explore exit and financing options.

The Race for Ad Space

One of the key motives behind the Verizon-AOL deal is said to be a need for a quick move into mobile/online/video advertising. Over the years, AOL primed itself for such a buyout by making several acquisitions of smaller adtech companies in an attempt to compete with fast-movers like Facebook. This week’s news has led to several interesting studies into what digital advertising looks like in the future and what role today’s media and technology companies will play.

Content Goes Cross-Continental

Globalization has impacted almost every industry, and media is no different. Netflix is now creating shows with concepts they believe will transcend borders and HBO, Showtime and the NBA all struck deals in the past eight months to distribute through Chinese platform Tencent.

Niche Content Wins

Hyper-targeted content is becoming the new normal particularly amongst over-the-top (OTT) content providers. There has been some debate about whether OTTs, like Netflix and YouTube, will ever get access to cable companies’ distribution channels or simply imitate the model. Either way this may be one more reason we see deals being struck between the two.

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