David Elms, KPMG’s Head of Media, comments on the back of figures showing that the value of deals in the TMT sector during the first quarter of 2014 has reached its highest level since 2006:
“Attitudes and outlook in the industry have definitely changed and the pace of activity we are seeing now is likely to continue.
“In my view there are two main factors that are likely to stimulate M&A activity further: the improved economic outlook in the UK and other global economies as well as the much-discussed convergence which will continue to force TMT businesses to adapt.
“Business models across TMT need to change rapidly to remain relevant to consumers.
“This fast-changing environment will make further M&A activity necessary as creating a market-leading proposition organically is becoming more difficult; a small acquisition or several small acquisitions may be needed to access the necessary skills at an acceptable price and in a viable timeframe.
“In the media sector, many traditional companies, such as print-based businesses, have been left seriously wounded by the significant migration to the digital delivery of media content. This in itself is also likely to drive M&A activity, competition commission permitting. It is surprising that further activity has not taken place sooner.”
“The search for original TV content among newer, but maturing, TV content providers such as Netflix and Hulu could also act as a catalyst for M&A activity. Many of these businesses are moving from offering ‘secondary’ content – TV content and films which have previously been broadcast - to offering ‘primary’ content to secure a competitive advantage. Furthermore, this strategy could lead to a convergence between businesses in other parts of the media sector including radio and print media.
“This type of content-orientated convergence is driven by a desire to create sophisticated communities of customers. Targeting such communities is not a new concept, but technology is making it an increasingly achievable ambition. As can be seen by the launch of London Live yesterday, the local TV licence for London held by the owners of the Evening Standard and the Independent, the offering to consumers is now becoming increasingly integrated; boundaries are being broken down.”
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