A Year of Mergers and Acquisitions
The predictions below come from Todd Krizelman, CEO and Co-Founder of MediaRadar.
In each of the last three years, there has been a torrent of merger and acquisition deals in the media space. Media investment bank, JEGI, Inc., published that there have been nearly 2,000 of these deals made annually. Last year, more than 1,700 mergers and acquisitions were completed specifically.
Of those approximately 1,700 deals, three have stayed alive in our minds because of both the prominent nature of the companies involved as well as the high value of the transaction itself. Below are those three large deals in order of price.
3 of the Biggest Mergers and Acquisitions from 2018
1. AT&T purchased Time Warner, the cable television company, for $85 billion
This merger, closed in June 2018, “would be the fourth largest deal ever attempted in the global telecom, media and entertainment space, according to Thomson Reuters data” and “the 12th largest deal in any sector.”
But, it was met with a lot of pushback. The Thomson Reuters article noted that the U.S. Justice Department felt like the deal would especially harm customers and provide AT&T, the second best wireless carrier, with an unfair advantage against its competing pay TV providers.
2. The Walt Disney Company buys Twenty-First Century Fox, Inc. for $71.3 billion
In the same month, The Walt Disney Company, a mass media and entertainment conglomerate, shoveled out about $35.7 billion in cash and around 343 million new shares to the shareholders of the other mass media corporation, Twenty-First Century Fox, Inc..
This acquisition allowed The Walt Disney Company to expand its direct-to-consumer (DTC) offerings and international presence.
3. The Meredith Corporation acquired Time, Inc. for approximately $2.8 billion
In a January 2018 press release the mass media corporation, Meredith, announced its official acquisition of the American media conglomerate. In an all-cash transaction, the latter shareholders earned $18.50 for each share.
The deal aimed to increase readership, paid circulation, and monthly unique visitors to the site, as well as expand Meredith’s reach with the Millennial generation.
Will There Be a Strong Merger and Acquisition Environment in 2019?
Goldman Sachs doesn’t think so. The investment bank and financial services company was quoted in an article from TheStreet, stating that “November  data does not capture the recent market selloff (SPX down 4% MTD), suggesting a modestly weaker M&A environment” as we advance into the new year.
Morgan Stanley is on the same page. Economists from the company predict a “15% chance of a recession in 2019.” This is not only an indication that the overall economy is failing, but also a sign that companies will spend less for new businesses.
More Consolidation, but Pricing is Coming Down for Media Companies
CNBC reported that the telecommunications corporation, Verizon, spent $4.4 billion for AOL in 2015. Then, just one year later, it acquired Yahoo for $4.8 billion. By December 2018, Verizon was dissolving around half of its $9 billion investment in Oath (a company combined of AOL and Yahoo) and recording a $4.6 billion loss from the two buys.
But, AT&T struggled even more.
The television business and news channel, CNBC, noted that, while shares of Verizon “were up about 1% to about $59,” shares of AT&T were down.
According to the same CNBC article, after the telecommunications conglomerate ruined its $49 billion DirecTV acquisition and basically halved the total value of the deal, it committed a similar mistake.
In October 2016, AT&T bought Time Warner for $107.50 a share, which was 40% more than when Bloomberg News first reported the potential acquisition, announced CNBC.
CEO and Co-Founder of MediaRadar, Todd Krizelman, expects merger and acquisition deals to continue, but predicts that their price points will probably lower.
There is reason to believe that their pricing will be on the decline in the year 2019.
Many companies will merge to achieve scale and a greater degree of competitive advantage, or sell in distress. Remember, even very large companies like Verizon and AT&T can struggle.