Despite being the least active sector for private equity in the last 12 months, media & communications companies can expect substantially more backing from institutional investors , says a survey from accountants and business advisers, Grant Thornton UK LLP.
The Grant Thornton survey reveals a high level of optimism over expectations of private equity activity in the UK media sector. Two-thirds of private equity investors expect to see activity levels increase in the UK media sector over the next 12 months. Only ten per cent of those surveyed predict a fall in activity levels, while 23 per cent expect deal flow to remain the same. A significant majority of respondents (90 per cent) plan to make further investments in the UK media sector over the next year.
According to the survey, 88 per cent have singled out online content as the most significant growth area. Consequently, 87 per cent believe investors will most aggressively target businesses operating in the digital niche.
“Given the tumultuous impact of digitalisation on the media sector, and the subsequent increase in demand from clients for marketing services that this has created, it is not surprising that the digital sub-sector is leading the M&A activity” added Bolton.
The second ranked target area for PE comapies is b2b publishers/events operators who enjoy more robust incomes than b2c companies.
The least attractive segments according to the report were music (which has intrinsic piracy problems and has been tainted in PE circles by Terra Firma’s unsuccessful purchase of EMI) & consumer publishing, as both areas are going through structural change which makes forecasting future earnings problematic for PE firms as they calculate exits, and television which is already heavily consolidated.