As highlighted in our most recent MEDIAtalk report, a summary of global M&A activity in the media sector, the number of media deals leapt up by 37% compared to H1 last year. The increase reflects new optimism for the sector after a difficult 2020 for many.
Thanks to the success of the vaccine program in the UK, events are back and the public is keen to get back to enjoying them. The demand for home entertainment that we saw boom during lockdown, seems to be sticking around and will drive production activity over the coming months.
What makes tech-led marketing businesses attractive to private equity?
Possibly the most interesting trend for me, however, is the mind-blowingly fast shift of consumers towards online channels. This has driven brands to focus on digital solutions and tech platforms that support more traditional creative activity. The emphasis on digital-first has made parts of the marketing services sector desirable to private equity in a time when firms are sitting atop a mountain of dry powder in the range of USD$1.9tn.
Marketing Services and Advertising combined accounted for over a third (39%) of all UK media deals in the first six months of the year, with PE a big part of this. We recently worked with MediaSense, the media analytics, advisory and auditing business, to secure investment from UK-based PE firm Apiary Capital along with supporting LDC’s investment in Hybrid News and Livingbridge’s investment in Venatus Media both businesses that blends technology and marketing services. These tech-led marketing businesses have many attractive features, compared to more traditional agencies, such as:
- Scalable technology
- Lower reliance on people
- Resilience through the pandemic
- Strong organic growth
- Opportunities for M&A, for example adding specialisms and geographies in global markets
- Data, data and more data!
Outlook for media
The FAANGs (Facebook, Apple. Amazon, Netflix, Google) understand the power of data and work with companies that help them gain insights and to deliver bespoke content. As such, the marketing businesses that operate in this ecosystem are starting to reflect the valuations of the tech sector in which they operate.
Mergers or partnerships (43%) and acquisitions (34%) are still very much on the growth opportunity radar for companies in the media sector, according to our survey of UK media sector leaders, showing that it isn’t just the PE firms who are looking for opportunities but the media companies themselves. We continue to work with S4 on its M&A journey. As we move further through 2021, we could see a record-breaking amount of deals in media during this perfect storm.
Download your copy of our MEDIAtalk H1 2021 report, which also features a spotlight on the Netherlands and Private Equity’s growing media appetite in the region.