H2: 2020 MEDIAtalk THE BRIGHT APPEAL OF M&A ii h2 2020 | mediatalk mediatalk | h2 2020 1

H2: 2020 MEDIAtalk A WORD FROM ANDY VINER GLOBAL HEAD OF MEDIA AND ENTERTAINMENT GLOBAL M&A: OVERVIEW 4 UK MEDIA M&A: OVERVIEW 10 Media in 2020 proved to be a remarkably resilient sector, buoyed in particular by increased demand for entertainment UK MEDIA M&A: HOT SECTORS 12 and related services. Globally, the value of media-related THE MEDIA PORTFOLIO 16 M&A topped USD $130 billion, a figure that underscored the market’s staying power in a remarkably difficult year. SPOTLIGHT ON THE US 20 And even though we saw a reduction in the number of deals LOOKING AHEAD TO 2021 25 announced in 2020, average deal values actually increased by around 14%. There was, of course, a significant divergence in how COVID-related restrictions affected different subsectors, with large numbers of companies directly vulnerable to lockdown policies and the newly cautious behaviour of consumers that went with them. While premiums were placed on assets and businesses with strong tech underpinnings and/or embedded data and digitalisation plans, deals targeting under-performing businesses were slower to materialise. Investors will now need to determine how to price in any necessary recovery period and the impact of corporate decisions taken to help businesses weather the storm. 2 h2 2020 | mediatalk mediatalk | h2 2020 3

A WORD FROM ANDY VINER continued

That said, while revenue growth may be that. With its attractiveness to overseas slower initially through Q1, we anticipate investors and potential to bounce back, recovery to speed up over the rest of the it made up a big chunk of all deals struck year, and there could well be a shorter path through 2020, both within the UK and for M&A too. Globally, the media sector globally. Many of these deals focused, as retains significant upside potential, and deals globally, on companies looking to add to were noticeably picking up in H2 of 2020. PE or enhance their digital reach and targeting (private equity) has played a fundamental capabilities. role in keeping M&A rolling across the mid- In the world of entertainment, meanwhile, market, both in established areas of interest content is still king, and the persistent and in newer directions. PE houses recorded a battles over streaming capabilities have 19% increase in activity over the second half only strengthened the appeal of production- of 2020, as compared with H1 2020. related businesses. Digital publishing is also US media deal activity slowed in 2020 seeing a steady flow of deals as PE and trade compared to previous years, in the buyers vie for the best brands and assets. wake of recent historic market shifts. Interactive gaming remains another space to But the slowdown also created pent-up watch. demand to put cash to work and capture So in 2021, we may not quite see a return to new opportunities as consumer media pre-COVID deal volumes just yet; there are consumption habits change. The end of the still too many uncertainties to resolve. But the year brought a resurgence in ad spending, stage is certainly set for another very active which was a boost both to entertainment twelve months… companies and the media agencies that develop and place ads. Signs point to a busy We hope you find the latest edition year for deal flow and investment in 2021. of our report useful – do please share your comments or feedback In the UK, as around the world, few businesses at [email protected]. escaped unscathed from the pandemic’s blanketing effect on the economy. But pre-pandemic, the UK’s creative industries contributed more than GBP £111 billion to the UK economy, and the advertising and ANDY VINER marketing subsector made up a quarter of Partner, Global Head of Media & Entertainment 4 h2 2020 | mediatalk mediatalk | h2 2020 5

GLOBAL M&A OVERVIEW

2020 was a year with little relief for UNITED STATES To take one example, a consortium of FIGURE 1: GLOBAL MEDIA M&A DEALS BY TOP TARGET REGION IN 2020 investors led by Swiss venture capital firm many businesses, as the pandemic In the US, President Joe Biden’s celebrity- Blue Horizon Corporation – and including coiled itself around markets and studded inauguration bodes well for political Griffith Foods and PE backers Trustbridge intermittently constricted activity. But stability after four rambunctious years, Latin America 1% Africa 0.3% Partners and EQT Partners – announced a even if there is a bumpy road ahead to but it may not be so auspicious for all. The Middle East 1% USD $135 million investment in Livekindly. Australasia 3% recovery, we can see now that there are tech sector, for one, is likely to come under Focused on sustainable, cruelty-free health Central and Eastern Europe 4% certainly blooming pockets of optimism, renewed anti-trust scrutiny, and the new & beauty content, Livekindly has benefited Canada 5% administration looks ready to explore tax and exciting opportunities ahead. from heightened consumer interest in changes that could target capital gains. United States 31% environmentally-friendly products. Though the number of global media M&A Both these developments could spur M&A South Asia 5% deals declined by 30% year-on-year in 2020, activity: tax-rate increases could accelerate The US began catching up significant the second half of the year saw stronger the completion of transactions, while ground in the second half of 2020. Deal volumes return across the Asia-Pacific and corrective antitrust enforcement may force volumes had diminished markedly in H1, United Kingdom 8% US markets, with relative spikes in September the divestiture of certain brands or assets. but we saw a spurt of acquisitions targeting and December. US-based companies in Q3 and Q4, and The US remained top of the list of regions PE activity lifted investment in the mid- for both targets and acquisitions in 2020. Contrary to some expectations, the pandemic market. Crestview Partners, for example, Though other geographies have become more has not led to a complete paradigm shift. set its sights on a future rebound for in- active in the media sector, contributing to Rather, it has simply accelerated existing person events by committing USD $135 long-term trends, which in fact should a slight fall in the US share of overall deals million to Viad Corp, an Arizona-based Western Europe 16% since 2018, its status as a global powerhouse provide a measure of confidence from a provider of event marketing services. strategic perspective. True, many sectors remains undiminished. In 2020, 30% of global acquisitions targeted American may be feeling the pressure to fast-track Asia Pacific 26% digital transformation, but these adjustments companies, while 29% of global buy-side will remain relevant well beyond lockdown. deals originated in the US. Deals led by In economic terms, the vast spending American buyers fell by half (50%) in 2020 programmes and monetary policies now on the previous year, but deals targeting US in play around the world are likely to keep companies fell by a relatively modest 30%, THE US STAYED TOP FOR DEAL SHARE WITH 31%, WHILE ASIA-PACIFIC PICKED UP SHARE ON interest rates at basement levels for some demonstrating the market’s persistent allure 2019, AND WESTERN EUROPE AND UK SAW THEIR SHARES DECLINE. while yet – always a positive for investors. against even the most difficult of backdrops. 6 h2 2020 | mediatalk mediatalk | h2 2020 7

GLOBAL M&A OVERVIEW

ASIA PACIFIC WESTERN EUROPE (EXCLUDING UK) FIGURE 2: GLOBAL MEDIA M&A DEALS BY TOP ACQUIRER REGION IN 2020 The Asia Pacific saw its share of global deal The speedy rollout of impressive test-and- By contrast, China’s share of global deals has M&A activity in Western Europe also picked volumes remain steady over the second trace systems in South Korea and Japan in H1 shrunk over the past couple of years, along up marginally in the second half of 2020, Latin America 0.4% half of 2020. Though year-on-year deal- may well have benefited M&A activity later with the amount of venture capital invested even if global deal volumes still slipped Middle East and Gulf Region 1% Central and Eastern Europe 2% making declined here as everywhere else, in the year: both countries recorded a higher into the market since 2018. Helping to fill that on 2019. The region saw 16% of deals on Asia Pacific improved its proportion of global volume of overall deals than the UK. Japan space, Tencent led a Series B funding round the buy-side, a 3% reduction on 2019. Its Australasia 4% deals as both a target and acquirer region led the way, both as an acquirer and target of USD $100 million for Versus Programming share of global deal volume as an acquirer South Asia 5% for the year – by 3% (to 26%) and 2% (to country, with a shifting around of publishing Network (VSPN) in October. The investment region fell by just 1%, to finish the year United States 29% 29%) respectively. As with previous years, assets. But South Korean production and will help further VSPN’s ambitions to grow the with 17% of global deals by volume. Canada 6% deals were primarily domestic, some intra- entertainment was also on the up: two reach of esports around the world by creating There were a slightly higher number of intra- regional; but 7% of acquisitions made by of the bigger 2020 deals involved South a dedicated institute and culture park. regional deals, compared to other regions. Asia-Pacific companies targeted the US. Korean music giant Cube Entertainment Cross-border transactions fell largely within United Kingdom 7% and content producers Fantagio, which EU boundaries, though a minority reached swapped out majority investors during H1. out to the US, the UK, the Middle East and Africa. Germany and France vied for top target country, and the Nordic countries also contributed notably to the overall tally.

In December, UK-based PE firm Inflexion Western Europe 17% Private Equity Partners announced a tender offer for all outstanding shares of Norwegian trading and market data provider, Infront. The offer, which values Infront at Asia Pacific 29% more than EUR €250 million, will provide the company with capital to support its growth ambitions through potential future transactions. Sweden came second only to Germany as top acquirer with a flurry of THOUGH THE US SAW MOST DEALS AS ACQUIRER REGION, ACTIVITY OVERALL DECLINED. deals. These included Stockholm-based digital THERE WERE INCREASES FOR THE ASIA PACIFIC, CANADA AND SOUTH ASIA. agency Knowit’s acquisition of Norwegian consultancy Creuna for EUR €17.2 million. 8 h2 2020 | mediatalk mediatalk | h2 2020 9

GLOBAL M&A OVERVIEW

UNITED KINGDOM OTHER REGIONS In H1, the UK’s share of global deals remained Canada and South Asia – which includes India consistent year on year, though continuing and Pakistan – each reported 5% of global struggles in H2 and a third lockdown in deals as a target region. While that represents November hampered M&A. The UK concluded a marginal dip on 2019 for South Asia, Canada 2020 with 7% of all buy-side deals by increased its share of sell-side deals by 3% volume, roughly half targeting domestic (to 6%), boosted by an especially busy H1. acquisitions, followed by Western Europe South Asia recorded 5% of global deal volume and the US. Along with other established as an acquirer region, with India’s thriving players the UK has lost some ground as market and growing media consumption a emerging markets continue to strengthen big part of that success. In December media their position in the global media space. giants Microsoft and Google, alongside The UK remains an obvious draw to overseas investors Sofina SA, Falcon Edge Capital investors, even if logistical difficulties and and Lupa India, acquired an undisclosed a combination of pandemic and Brexit- stake in Dailyhunt, an India-based provider related uncertainty led to a drop-off in of news and digital book applications, for activity. Global deals as a target region approximately USD $100 million. Since fell by 2% (to 8%). The decline is likely to its founding in 2009, Dailyhunt has raised be temporary, however, more a matter almost USD $320 million from investors, of the surrounding context than a lack of including a handful of PE backers. confidence in the UK media market itself, and UK companies are likely to find themselves in greater demand as 2021 progresses. 10 h2 2020 | mediatalk mediatalk | h2 2020 11

UK MEDIA M&A: OVERVIEW

In line with the global downturn, UK media transactions declined by roughly 38% in 2020 year-on-year. Underlying that figure, however, is the fact that deals held up reasonably well through the latter part of the year. Though announcements fell relatively silent in August, a final flurry in December buttressed overall volumes.

FIGURE 3: UK M&A VOLUMES AND VALUES (MEDIA SECTOR 2004-2020) Against a backdrop of unprecedented economic disruption, we saw the lowest number of media M&A deals since 180 Number of deals Value of deals (£m) 50,000 we began tracking the metric back in 2004. In fact, only the financial crisis of 160 45,000 2009 had a comparable impact on deal flow, when the threat of shrinking credit lines 40,000 massively hindered M&A activity. 140 When it comes to M&A in 2021, however, there are 35,000 120 already grounds for cautious optimism. For one thing, Brexit is no longer an impending reality; the fact of a deal, 30,000 Value (GBP m) despite its shortcomings, provides much-needed clarity for most 100 businesses. The vaccine rollout, a clear success so far, will hopefully 25,000 foster a sense of optimism and enable businesses and consumers Number 80 alike to begin looking ahead with more confidence. 20,000 And, as in the US, the UK Government will be looking at potential 60 tax changes – including around Capital Gains Tax. This will be of great 15,000 interest to investors – while deal flow may not return to pre-COVID 40 levels immediately, the coming year is likely to see active investors 10,000 and businesses look to M&A as a means of reclamation.

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UK MEDIA M&A HOT SECTORS

Taken together, advertising and As businesses trimmed their budgets in approach to development as well as As consumers around the world were forced Archant, the UK’s fourth-largest local- marketing services made up the 2020, it was a challenging year for the contributing to geographical reach. S4 to stay in, and the streaming wars raged newspaper publisher with a 150-year history, largest media subsector for M&A likes of ad-agency giants WPP, Omnicom, has kept the momentum up into the on, demand for content remained strong. felt the full force of this transition in 2020, Denstu and Publicis. Not only that, but New Year, with the announcement of as it sought financial support in the form of deals in the UK in H1 2020. Though Silverback Films, a leading UK natural-history the ongoing challenge from creative two takeovers in the first week of 2021: a Company Voluntary Agreement (CVA) to deal making slowed in the second half producer responsible for the landmark consultancies and digital-first offerings like Decoded, a New York-based creative continue its operations. Rcapital acquired of the year, the two still accounted Netflix series Our Planet, was acquired by S4 Capital kept the viability of the holding agency will be merged with MediaMonks, a 90% stake in Archant in September for All3Media for an undisclosed fee in December. for 28% of media M&A overall. company model under investor scrutiny. while San Francisco-based Metric Theory an undisclosed fee, and was joined by the Silverback Films will sit alongside over 40 For advertisers to cope with uncertainty will become part of MightyHive. Pension Protection Fund, which absorbed the S4 came into 2019 on the back of a wave other production and distribution companies they need the flexibility to efficiently pension liability, reportedly GBP £50 million, of acquisitions and just kept on going, Though big agencies will continue to rely in All3Media’s portfolio. In the same month, measure, target, and adapt messaging, so plus the remaining 10% share of the business. despite the logistical issues thrown up by the on scale in order to compete, WPP has also Discovery Communications, which acquired many deals unsurprisingly focused on the The deal means Archant can continue to pandemic. In September, S4’s content arm looked to spin-offs (as with 2019’s Kantar All3Media in a 2014 joint venture alongside ability to generate timely content and/or operate while affording its creditor some MediaMonks announced that it had acquired deal) and potential divestments as part of Liberty Global, announced the launch of a enhance programmatic capabilities. Late in breathing-space, but it highlights the parlous Dare.Win, an award-winning Parisian digital its strategy. But acquisitions are still part new streaming service Discovery+. Having the year, for example, two award-winning state of local newsprint media, a condition creative agency. Dare.Win counts some big of the plan: in September, for example, produced films for Discovery in the past, the independent programmatic agencies only exacerbated by the pandemic. names among its clientele, and the deal will Wunderman Thompson (a WPP agency itself deal secures access to more content for the came together as US-based Kepler Group expand MediaMonk’s geographical reach into formed in 2018 by consolidating two other new streaming platform in years to come. No surprise, then, that the future of announced the acquisition of UK Infectious Europe’s third-largest advertising market. WPP agencies) announced the acquisition publishing looks set to depend on the Media for an undisclosed consideration. The drop in ad revenue wasn’t just bad news for an undisclosed amount of France-based converging paths of digital transformation Only days earlier, S4’s programmatic wing for advertisers. Media companies reliant on In October, digital agency Jellyfish Group Velvet Consulting. The latter’s expertise and consolidation. Regional owners such as MightyHive announced its acquisition of advertising spend, including news publishers, announced two acquisitions to expand its in multichannel consumer engagement JPI Media have launched digital acceleration UK-based analytics consultancy BrightBlue. were also forced to tighten their belts. Print Latin American presence. Reamp and San demonstrates WPP’s commitment to programmes to begin the process of Around the same time MightyHive also advertising was especially hard-hit globally, Pancho, acquired for undisclosed amounts, enhancing its own digital capabilities. converting their print titles, following acquired Amazon agency Orca Pacific, falling by 25% in the year according to are data-driven players that will enhance the success of digital-only titles like The enhancing an already well-established Broadcasting and content accounted for 27% GroupM. It was especially tough on traditional Jellyfish’s programmatic capabilities as Independent, which grew revenue by 12% relationship with Amazon. All deal values of all media transactions in 2020, boosted newsprint in the UK, which was already well as provide greater market access. in 2020. The Independent embraced digital were undisclosed, but follow S4’s pillared by a slew of deals announced late in the year. fighting waves of increasing digitalisation early, and appears to be reaping the rewards. and changing habits in news consumption. 14 h2 2020 | mediatalk mediatalk | h2 2020 15

UK MEDIA M&A HOT SECTORS

At this point, consolidation looks like a FIGURE 4: UK MEDIA M&A TRANSACTIONS BY SUBSECTOR 2020 Events management unsurprisingly felt the structural necessity. Traditional publishing full force of the COVID-19 outbreak. But early is already a capital-intensive realm and in the year, SMi Group, a company specialising substantial capital is required to undertake in global events for the aerospace, defence digital transformation. Early in 2020, Events management 2% and pharmaceutical sectors, was acquired by struggling owner JPI Media – the UK’s third- US-based SAE International, a professional largest regional newspaper publisher – had association for engineers which operates Marketing services 10% suggested that it was no longer in search internationally. Financial details of the deal, of a buyer, though it continued to divest Broadcasting which allowed SAE international to merge SMi assets: in October, Daily Mail and General and content 27% Group with its publication arm, Tech Briefs, Trust (DMGT) acquired its printing operations were not released. in Dinnington, Portsmouth and Carn. Digital media 18% Later on in 2020, deals were thin on the But then, at the very end of the year, ground in the events space, though some National World, a takeover vehicle headed buyers continued to build their portfolio. by previous Mirror Group chief executive In November Pageant Media, a provider David Montgomery, announced that it had of global business information and events, acquired JPI Media for around GBP £10.2 acquired Falk Margues Group, a conference million. National World has set its sights and networking company specialising in on developing a ‘sustainable local online promoting the advancement of women in the news publishing model’ that will benefit private equity, venture capital and alternative not only from JPI Media’s long-established investment worlds. Financial details were not brands but also from its prior efforts in Advertising 18% Publishing 25% disclosed. digitalising a handful of top titles. For events management, the acceptability of large gatherings in a post-vaccine world will determine the rate at which the sector as a whole can return to growth in coming years. BROADCASTING AND CONTENT M&A PICKED UP IN H2 2020, JUST AHEAD OF PUBLISHING. MARKETING SERVICES AND ADVERTISING COMBINED ACCOUNTED FOR 28% OF ALL DEALS. 16 h2 2020 | mediatalk mediatalk | h2 2020 17

THE MEDIA PORTFOLIO THE MEDIA PORTFOLIO PE’S LOVE-IN WITH ADVERTISING AND MARKETING

Even private equity – no stranger to risk In many ways, and with a few notable exceptions, the advertising and marketing – was not entirely immune to the unique world has not historically been a natural ecosystem for PE to thrive. Businesses challenges of 2020. Deal volumes show that rely on the vagaries of creativity, with talent locked up in individuals, may the vacuum effect that the pandemic look a little too risky for the PE mindset, which tends to prefer more robust had on M&A. And yet, PE remained models offering predictable revenues and greater accountability, such as active in discussions around prospective subscription-based platforms and software. deals, and global activity picked up significantly in H2 – in fact, the number But advances in programmatic modelling, deal focused on enhancing data capabilities, of global PE-related deals increased by digitisation and global scalability have following Norvestor’s acquisition of combined to make advertising and marketing a 60% stake in CapMan in 2018. 19% in the second half of the year. much more attractive to PE houses. PE In March, US-based PE firm Clayton, Dubilier PE proved resilient in an extraordinary year houses are attracted to advertising’s and Rice (CDR) announced its intention to dominated by the need to provide liquidity to increased strategic capability to measure take healthcare and communications group a platform for further M&A activity as portfolio companies and find effective ways to and track effectiveness via data-driven Huntsworth private through a recommended Fishawack acquired US-based consulting firm assess value. Fewer exit routes meant a relative decision-making, witness Blackstone Group’s cash offer. The deal completed in May for circa Skysis in April. It then went on to consolidate spike in secondary buy-outs (SBOs), but PE again December acquisition of US-based marketing GBP £575 million. Aimed at strengthening further with the acquisition of healthcare played a leading role in driving acquisitions. optimisation platform, Liftoff, in a deal Hunstworth’s offering in the medical space, communications business Hive, including Deal flow will take some time to rebound as the estimated to be around USD $400 million. the new backing allowed Huntsworth to its US-based subsidiary, from Kin and Carta pace of recovery, regulatory risks and changing As a result, even in this COVID-hit era, many embark on its own acquisitions later in 2020, in December, for GBP £13.8 million. This demands continue to confound expectations. businesses focused on social media, digital And digital sports platform DAZN Group entered including of Nucleus Global and Cormis deal provided debt alleviation for Kin and advertising and publishing are delivering the Buy-and-build deals remained on pace from into talks with TPG Capital in the summer around Partnership, both medical industry specialists. Carta, allowing it to focus on becoming sort of strong multiples and profitability that previous years, demonstrating the value the possibility of selling a significant stake in a an integrating technology platform. PEs look for. More recent subscription options The management buyout (MBO) of medical placed on digital content and health-related number of its brands. In September, Integrated have increased the appeal of publishing communications agency Fishawack in MSQ Partners, the international marketing offerings in 2020. H2 saw a clutch of buy-and- Media Company (IMC), a portfolio company and programming too, whilst retaining a April highlighted two trends of 2020: the communications group backed by LDC, builds, including Arsenal Capital’s takeover of of TPG Capital dedicated to digital media, premium on creativity and inventiveness. contextual premium placed on health-related acquired publicly-listed advertising company healthcare communications firm Cello Health announced the acquisition of a majority stake media, and the rise of SBOs. Bridgepoint Be Heard Group for GBP £6.2 million in June, PLC via Pharma Value Demonstration for a in three online sports news brands from DAZN Communications firm North Alliance Advisors supported the existing management in a deal designed to enhance MSQ’s tech and recommended cash offer of GBP £178.8m. Group – Goal.com, SPOX Media and Voetbalzone. (NoA), a portfolio company of Norwegian in an MBO valued at GBP £240 million. It data analytics offerings. Providing these new PE house Norvestor Equity, acquired was the end of a fruitful era of growth for capabilities can be effectively implemented Swedish consultancy Peregrine in August. UK-based PE firm, LDC, which had previously across MSQ’s global offices, management are Peregrine’s digital-first approach will be supported an MBO in 2017 for GBP £38 hopeful the deal will lead to the acquisition crucial in supporting NoA’s data-focused million. Bridgepoint’s investment provided of larger clients, more frequently. development plans. This is NoA’s second 18 h2 2020 | mediatalk mediatalk | h2 2020 19

THE MEDIA PORTFOLIO THE MEDIA PORTFOLIO BACKING CONTENT SINGING A DIFFERENT TUNE

With the proliferation of devices and (C3M) for an undisclosed sum. The deal With growing supplies of dry powder, PE The scale of the opportunity is such that the platforms, and restrictions forcing will make Framestore the world’s second firms have been looking for more creative big PE players all appear to be entertaining viewers to spend more time at home, largest visual effects company by headcount, ways to deploy capital, and with the rise the chance to invest in Germany’s top global consumption of video and TV adding 3500 artists, engineers and experts to of subscription services, music copyrights football league, the Bundesliga, as it maps have become highly sought after. Music- out plans for a global pay service. Reports continues to rise. Even though filming Framestore’s 2500 existing employees. investment company Hipgnosis acquired a suggest the league is open to selling a stake In July, Moonbug Entertainment, a creator of of new shows and films ceased for 50% stake in the publishing interests of Rick in the range of EUR €200m to €300m. It will children’s shows distributed across numerous much of the year, post-production and James in November, and made an early deal only be a matter of time before other leagues streaming platforms, received USD $120 virtual effects companies worked on in 2021 for stakes in the interests of Jimmy follow suit, and Italy’s Serie A is already million in funding from a consortium of through the lockdowns. By working Lovine, Lindsey Buckingham and Neil Young. under pursuit. private equity backers led by Goldman Sachs remotely through connected equipment Earlier in 2020, Stevie Nicks and Bob Dylan Growth Equity. The deal follows an initial and practising social distancing where each sold a significant stake in their back- USD $145 million round of investment by possible, the subsector was able to stay catalogue to Primary Wave and Universal many of the same players in December 2018. Music Group respectively. active despite the disruption. The Series B announcement in July coincided As content has become an increasingly with Moonbug announcing the acquisition PE firms are also looking at leveraging popular commodity, PE has strengthened its of two US-based children’s entertainment the growth of OTT subscription services foothold in the world of TV and film too. As companies, Blippi and CoComelon. in the sporting world. Of course, sports in the publishing realm, access and scalability CoComelon alone boasts over 3.5 billion is not a completely new environment for are critical considerations for investors looking online views a month. PE – European PE investor CVC Partners, for example, was an early mover that held to take advantage of popular titles matched Digital publishing also proved a hot a stake in Formula One for a decade. It has with efficient distribution capabilities and marketplace amongst PE firms, with special also acquired a minority stake in English audience access. interest, education and technology-focused Premiership Rugby and is in the mix for a brands all attracting investment. Red Ventures In November, PE firms Aleph Capital and Metacritic, TVGuide, ZDNet and Chowhound, reported share of GBP £300 million in the – a portfolio company of General Atlantic Crestview Partners acquired Framestore, a UK- will help ViacomCBS to level its balance sheet Six Nations Rugby tournament, as well Service Company and Silver Lake Partners – based visual effects company that has worked after its blockbuster merger. Only days after as a EUR €1.6 billion investment in Italy’s made headlines when it acquired the popular on many UK children’s entertainment titles. announcing this deal, Red Ventures expanded Serie A football league, alongside Advent digital media brand CNET from ViacomCBS It’s the third major investment in Framestore its digital content with acquisition of Lonely International. in the last six years, and enabled Framestore’s for approximately USD $500 million. The deal, Planet Global, the digital travel content November acquisition of Company 3/Method which includes CNET’s subsidiaries Gamespot, publisher, for an undisclosed sum. 20 h2 2020 | mediatalk mediatalk | h2 2020 21

SPOTLIGHT ON THE US SPOTLIGHT ON THE US

BUILDING THE MEDIA DEAL OUTLOOK DEAL DRIVERS CONSUMER CHANGE CONTENT CONGLOMERATES OF THE FUTURE In 2020, the US media and entertainment Looking ahead, built-up demand coupled Significant economic change inevitably Ad-based streaming services have generally US media deal activity slowed in 2020 sector recorded 161 deals with disclosed with strategic and investor interest bode well leads to significant behaviour change; very performed well but face a growing challenge, compared to previous years. In the wake financial terms worth some $60B in total for a resurgence in media deals in 2021. And quickly, some business models lose relevance, as subscription services rise and competition of recent historic market shifts, many announced value, according to S&P Capital already we can identify three major drivers while others surge in demand. Quibi, for increases. Consumers who wanted to cut companies and investors opted to watch IQ. Deal count declined 20% from 2019, but of media and entertainment deal flow in 2021: example, started the year as a hot platform cords are close to burnout on the breadth and wait for a shakeout before committing this is consistent with COVID-led market for consumers on the go, offering short-form of streaming platforms. The key now will be to any big moves that might contribute trends rather than a sign of any industry CONSOLIDATION content that differentiated it from other content assets and the ability to differentiate. to the media conglomerates of the future. struggle. streaming platforms. But demand shifted S&P Capital notes that Apple, Amazon and In 2021, media & entertainment companies But the slowdown also created pent-up when the pandemic hit: the platform closed AT&T, among others, are likely to continue While CFOs forecast economic recovery and will live or die on their ability to optimise demand to put cash to work and capture in December, then sold its content to Roku in the chase for in-demand media assets. increased deal flow for this year, according to and scale effectively. Independent studios new opportunities as consumer media January. Looking ahead, we concur with S&P Streaming music platforms also continue to the 2021 BDO Technology CFO Outlook and film & TV libraries will continue to be in consumption habits change. Capital that many media companies will be seek exclusivity following a year where many Survey, there is uncertainty around what’s demand by the streaming services, according looking to divest no-longer-core assets, whilst pivoted to provide live virtual concerts and After a stall in the first half of 2020, the end of likely to come out of Washington DC. With to S&P Capital. Similarly, media agencies and simultaneously bolstering their capabilities other digital experiences. the year brought a resurgence in ad spending, a new administration and change of Senate professional service firms will likely continue across now-essential opportunities. which was a boost both to entertainment control, new regulatory and oversight issues to merge and consolidate as they reorganise companies and the media agencies that are coming to the fore. Consumer privacy to address pandemic impacts and reduce At the same time, online gambling surged develop and place ads. Signs point to a busy issues, though put on the backburner during costs. in 2020 as consumers spent more time in year for deal flow and investment in 2021. the pandemic, remain a bipartisan area of home-entertainment mode, and brick-and- Strategic deals will drive the vast majority concern and are likely to be the subject of mortar businesses were forced to reimagine of media M&A in 2021, with private equity new legislation in the next few years. Indeed, their spaces and offerings with new safety keying in on subscription-based revenue for many companies, a standard set of privacy protocols and changing demand. This fact has models and other sectors where revenue rules or guardrails may be welcome: some clearly had a beneficial impact on gaming growth is strong and stable. The resurgence 45% of CFOs think the industry needs more valuations, as demonstrated by the feverish of SPACs (special purpose acquisition regulation, according to our survey. And bidding war for AIM-listed auto-racing game companies) in 2020 is likely to continue no matter which issues take priority on the developer, Codemasters, involving bidders as they are increasingly seen as attractive new President’s legislative agenda, media like US developer Electronic Arts (EA) and vehicles to facilitate some of the new year’s companies considering a merger or acquisition Take-Two Interactive Software. The online industry consolidation. will need to place appropriate emphasis and gaming industry is likely to continue to value on information governance and sound grow as strapped state budgets look for new data-ethics policies. ways to expand tax revenues, and we expect consolidation will drive deals in the gaming sector as well. 22 h2 2020 | mediatalk mediatalk | h2 2020 23

SPOTLIGHT ON THE US

HOT SECTOR: PODCASTING HOT VEHICLE: SPACs Surging demand for content and SPACs surged as a vehicle for deals in 2020, entertainment was a consistent trend in 2020 raising nearly $80 billion, up from $13.6 for consumers who spent more time at home billion in 2019, according to Yahoo! Finance. than ever before. That trend will carry into In January, CNBC reported that a number 2021, and podcasting is one sector that is sure of major media companies, including Group to benefit. Podcast listeners have grown by Nine Media, Bustle Digital Group, Vox, Vice 37.5% in just three years, according to Edison and Buzzfeed, were in talks to consolidate Research, and listenership has likely not yet and then go public via a SPAC. With ample peaked. On Apple’s platform alone there are targets on the market, 2021 looks to be 1.75 million podcasts and counting. another big year for SPAC deals in the media and entertainment sector. While Streaming music giant Spotify is also seeking this approach to scale is different than the to be a leader in podcasting. In 2020, it signed many mega-mergers seen in 2019, these several major deals, including for The Ringer new companies will contend with scrutiny in ($196 million), Gimlet Media ($230 million), the public markets and will need to ensure Anchor, Parcast and Megaphone, to bolster its strong governance and financial reporting content and enhance technology. Spotify also compliance are priorities alongside growth. inked exclusive deals with Joe Rogan ($100 million), Prince Harry and Meghan Markle Though a relatively small portion of the SPAC ($54.5 million), the Kardashians and others. funding targeted companies in the media sector (around USD $4 billion), such vehicles Similar to the streaming video platforms, may well become more commonplace in the exclusivity is a top goal for strategic deals due world’s foremost media market. For example, to the competition in the space. Podcasting in October Mountain Crest Acquisition is also likely to be an attractive market for PE Corp announced its acquisition of notorious investment, given that so many are built on publishing and programming company a subscription model and there is potential Playboy Enterprises, a combined entity with for licensing and royalty revenue on top of an estimated market cap of more than USD traditional ad sales. $370 million. 24 h2 2020 | mediatalk mediatalk | h2 2020 25

LOOKING AHEAD TO 2021

On paper, the prospects for an M&A To the extent that consumer spending Investor trends could also make 2021 an revival in 2021 look good. The pandemic remains constrained in 2021, the amount interesting year ahead, especially in the rise has significantly accelerated remote spent on interactive and at-home of SPACs as funding vehicles. Though in the working, ecommerce, digitisation entertainment is likely to continue to US, SPACs may eventually be limited by the and online entertainment, and the rise. Subsectors such as gaming and lack of dedicated market and regulatory hurdles, the prospects for a number of re-opening of economies should also streaming content remain ones to watch as the big players fight to capture revenues European markets may be more immediate, lead to exciting comebacks for live by responding best to demand. meaning this could well be a space to watch. entertainment and events management. While generally, media revenue growth While the pandemic impacted different may be slower through Q1, we anticipate sectors of the media and entertainment recovery to speed up over the rest of the industry very differently, the common year, and there could well be a shorter path denominator is change. Change in consumer for M&A too. A new approach to antitrust behaviour, change in demand, change in and privacy regulation in the US could platforms, and ongoing disruption will no precipitate M&A activity, for example, as doubt fuel deal activity across each sector businesses look to re-organise to adapt in 2021. So though we may not expect a to any statutorily enforced changes. return to pre-COVID deal volumes just yet, there is every chance of a strongly resurgent In the US and elsewhere, the end of the – and hopefully less turbulent – 2021… year brought a resurgence in ad spending, which was a boost both to entertainment Thanks for reading! companies and the media agencies that develop and place ads. As advertising and marketing models continue to de- risk and add scale through digitisation, there is every sign of a busy year for ahead for deal flow and investment. for more information contact This publication has been carefully prepared, but it has been written in general terms and should be seen as our digital media experts containing broad statements only. This publication should not be used or relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained in this publication without obtaining specific professional advice. Please contact BDO LLP to discuss these matters in the context of your particular circumstances. BDO LLP, its partners, employees and agents do not accept or assume any responsibility ANDY VINER or duty of care in respect of any use of or reliance on this publication, and will deny any liability for any loss arising AUDIT PARTNER & from any action taken or not taken or decision made by anyone in reliance on this publication or any part of it. Any GLOBAL HEAD OF MEDIA use of this publication or reliance on it for any purpose or in any context is therefore at your own risk, without any right of recourse against BDO LLP or any of its partners, employees or agents. +44 (0)20 7893 2373 BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member [email protected] of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members’ names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Conduct Authority to TONY SPILLETT conduct investment business. TAX PARTNER, HEAD OF TECHNOLOGY & MEDIA, UK BDO is the brand name of the BDO network and for each of the BDO member firms. +44 (0)20 7486 5888 BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms. [email protected] Copyright © February 2021 BDO LLP. All rights reserved. Published in the UK. DEMETRIOS FRANGISKATOS MANAGING PARTNER, BDO USA, www.bdo.co.uk NORTHEAST ASSURANCE SERVICES +1 212-885-7397 (Direct) +1 917 981 7311 (Mobile) [email protected] 21-02-2254