People consume entertainment on an unprecedented level today. They watch TV shows on their commute, listen to podcasts at the gym and play augmented reality games at cafes. As demand for content and digital recreation continues to climb, media and technology companies are increasingly using M&A as a key part of their growth strategy—whether to expand their content offerings, acquire new distribution platforms or be first to market with an emerging technology.
Old definitions of media, entertainment and technology are being erased as sectors converge. Apple, once known purely as a device maker, has a powerful content distribution system now via Apple Music and Apple TV. Facebook, previously thought of strictly as a social network, is redefining its value proposition with its strength as a content engagement platform, as evidenced by its success with video content and its ecosystem of services and products, including WhatsApp, Instagram and Oculus. Comcast, formerly a cable company, now owns TV networks, a film studio, digital-first studios and even game developers. Firms that do not expand into synergistic new segments often end up being purchased themselves—otherwise, they will become irrelevant.
At the same time, acquisitive strategies do have their pitfalls. For example, there have been reports of integration issues at Dailymotion since its takeover by Vivendi. Even with smaller deals, acquirers run risks such as overestimating the value of a technology or mismanaging integration. As cross-border deals become more common, companies must make sure that their mutual integration goals are aligned and executed.
To analyze and better understand media and technology companies’ attitudes toward M&A, Manatt Digital, a division of Manatt, Phelps & Phillips, LLP, conducted a survey of senior executives from around the globe, together with financial intelligence firm Mergermarket. Respondents revealed that content is indeed king, even as monetization of that content remains vital as well; emerging technologies such as virtual reality and augmented reality are still just that—emerging; a premium is put on strategic technology and first-to-market status; and overall, acquirers from different regions still share the same priorities: to enter new market segments and acquire strategic technology and patents.