As we fully unlock from Covid-19 restrictions there are clear indications that market confidence is returning to its former health. At Ciesco we recorded 832 M&A transactions in the first six months of this year, a surge of 46 percent year-on-year. The global economy has already surpassed its pre-pandemic peak, a survey by IHS Markit shows, and it is expected to register nearly 6 percent growth this year, its biggest expansion in nearly 80 years.
Private Equity (PE) appears to be leading the way thanks to the good availability of investment capital. Nearly half (44 percent) of all transactions in the first half of 2021 involved a PE buyer, with activity split between the acquisition of new platform companies and bolt-on acquisitions to existing portfolio businesses. Deal volume among PE firms rose 81 percent (372 deals were struck) and deal value rose 14.2 percent to $19.2 billion.
In this landscape, print media publishers emerged as key areas for investors keen to capitalise on the impact of the pandemic, which has seen ad spend on traditional media outlets dampened, circulation numbers influenced by recurrent lockdowns and the change in working and travelling patterns among traditional media consumers.
The traditional media sector, which includes newspapers, magazines, books and catalogues, and also TV, film, radio broadcasting, entertainment and media conglomerates, saw a total of 101 deals in H1. This was a 35 percent increase compared to the same period a year ago. Almost half (47 percent) of the acquisitions were from within the US, by American companies acquiring other US-based print magazine or newspaper publishers in specialist subjects, such as travel, automotive, real estate, shoppers, propane, fitness, industrial, B2B and others.
Many of those acquired were local newspaper groups, publications that gain their revenue from local advertising, like local car dealerships, general local retailers, and whose revenue dropped dramatically because there was no or very little ad spend in the last 12 months through the Covid period at that level. Buyers were the bigger media groups like News Corp., Viacom, RB Media, America CV Network – all adding to their portfolio.
Digital media saw the largest number of deals made in H1 with 172, an increase of 35 percent on the first half of 2020. This sector includes digital publications, podcast operators, streaming and social media platforms, and gaming and esports developers and providers, all of which are growing rapidly in popularity. The diversity of this sector, particularly businesses that have shown they are able to respond in an agile way to the changes in culture and the increased leisure time and appetite for digital entertainment amongst consumers, has made it very attractive to investors. H1 activity reflected an ambition among businesses in technology, digital, media and marketing to put themselves in the best position to flourish in the post-Covid era.
We see activity continuing throughout 2021 as the events of the past 12 months or so make it an opportunistic time for buyers in this subsector. In particular, we’re seeing the bigger, more established media groups seeking further acquisition targets to add to their existing portfolio or to be able to move into publishing sectors that they’re not currently active in, to be able to integrate into their organisation.
Digital media will continue to be on the horizon for active buyers who recognise and are seeking out companies that have quickly connected with their target audience through future-proofed technology and are seen to be on the cutting edge of content publishing and engagement.
Across the market as a whole, the most M&A activity of the first half of this year was in the USA and the UK, where 358 and 109 deals respectively were struck– an increase of just under 40 percent in the number of deals completed year-on-year. The deals made so far also suggest the pandemic has accelerated the trend among businesses to focus on social impact, with PE firms actively seeking companies emphasising social and environmental sustainability. As a result, at Ciesco we expect many brands to further change or enhance their approach to become better all-round ethical businesses that embrace purpose, social and environmental sustainability.
Digital and business transformation also looks set to accelerate at super-speed in 2021 and 2022 with the digital and data-led companies that showed resilience throughout Covid in 2020 leading the way. We also anticipate high and competitive activity, particularly from PE firms, with a specific focus on companies within the digital, technology, data and eCommerce landscape.
All in all, there’s good reason to be optimistic, as we hope for both the markets and the global population to remain as healthy as possible in the coming months.
Ciesco is a London-based leading international M&A advisory firm specializing in the technology, digital, media, and marketing sectors. Ciesco works with entrepreneurs and global corporates who require specialist advice on domestic or cross-border transactions, divestitures and business strategy, as well as private equity firms looking for growth or exit opportunities for their portfolio companies. Led by practitioners with deep industry experience and expertise within new media and disruptive technologies, Ciesco is able to deliver its clients independent and sound advice and execution, as well as access to an extensive network of strategic relationships, direct contacts with high-quality investors and opportunities globally.