TBI Weekly: Are we looking at peak M&A?

Mare Of Easttown

Consolidation is as much a part of the global TV business as cliffhanger endings and cocktail catch-ups in Cannes. But as buy-outs continue to dominate headlines, are we rapidly approaching peak M&A?

For those in the content business, the year to date has been punctuated by a series of major industry upheavals with eye-watering numbers attached.

These range from the creation of $44bn behemoth Warner Bros. Discovery last month, to Netflix’s subscription decline and subsequent share price implosion (down 70% since January).

On a smaller scale, we’ve seen Fremantle hoover up a raft of new firms as it seeks to reach ambitious revenue targets, while the first major moves to consolidate in the streaming market have also emerged. Talking to execs, it’s clear the M&A market is hot – but are sellers asking for too much? And how long will it last?

TBI takes a look at a variety of deals over the past week and explores if we’re reaching a new high on the M&A front.

Dirk Gently’s Holistic Detective Agency

Appetite from Asia

CJ ENM’s $1bn deal for Endeavor Content and JTBC Studios’ pick-up of Mare Of Easttown prodco Wiip last year underlined how companies in Asia – and South Korea, specifically – were delving into their deep-pockets to make a mark on the global content business.

They are not the only ones. While on a different financial scale, US- and Singapore-based financier, producer and distributor 108 Media is another firm making no secret of its ambitious M&A plans. This week’s acquisition of Malaysia’s Revolution Media by its UK arm is just the latest in what looks to be a push for global expansion.

The deal comes hot on the heels of its $6.3m December acquisition of UK-based DCD Media, which handed 108 control of distributor DCD Rights, along with Bridezillas prodco September Films and RIZE USA.

At the time, 108 Media described the purchase as “just the start of our very exciting structural expansion” and it hasn’t taken long for the company to bring Dirk Gently’s Holistic Detective Agency prodco Revolution under its roof too.

This week’s deal marked 108 Media’s first Asian corporate acquisition and saw it bring Revolution’s current slate and staff onboard too, while investing funds to grow the firm’s current capabilities in further developing and acquiring IPs across scripted, as well as pushing into factual and unscripted for brand and ad-sales partnerships.

These acquisitions have certainly expanded 108 Media’s global presence and capabilities and the firm is showing no signs of slowing down, with CEO Abhi Rastogi outlining its “continued mission to find and assimilate partners into our unique entertainment ecosystem.” In a rapidly consolidating market, picking out suitable targets is another challenge entirely.

Normal People

In Fremantle’s Element

One company that has applied itself with gusto to its recent M&A activity is Fremantle. Tasked with ramping revenue up to €3bn ($3.12bn) by 2025, it is perhaps little wonder that the RTL Group-owned company is leading the pack on the acquisitions front at present.

This week it snapped up a majority stake in Element Pictures, the Dublin, Belfast and London-based outfit behind the BBC adaptations of Sally Rooney’s Normal People and Conversations With Friends. It’s a deal that provides instant premium drama clout to Fremantle, as well as IP and a pipeline of projects, while also ensuring a new home for Element after 21 years of independence.

It also means the company will be a stablemate to fellow Fremantle additions such as UK indie Dancing Ledge (The Responder), scripted Italian production company Lux Vide (Devils, Leonardo), international development and production company Fabel (Bosch) and Australian-American television production company Eureka Productions (Parental Guidance, Finding Magic Mike).

Fremantle has also added UK unscripted production company Label1 (Hospital) to its roster in the past year, as well as 12 production labels in Norway, Sweden, Finland, and Denmark from Nordic Entertainment Group. It has been some rate of expansion and underlines that for Fremantle, acquisitions are a key weapon in the fight for premium content despite soaring prices.

Sources suggest to TBI that multiples of 15 are now being applied to deals, and as long as that continues, expect to see more long-standing independents decide now is the time to sign on the dotted line. For the groups, meanwhile, the hard work begins to ensure acquisitions turn into profit-generating investments.

Outlander

Exiting the race?

In US studio Lionsgate, we have an example of a media power looking to tap into the booming M&A market, but to divest itself of assets, rather than for further expansion. The firm is looking to either sell or spin off its pay-TV and streaming service Starz, with vice-chairman Michael Burns sharing that he gained confidence in the idea after witnessing some of the bigger deals struck last year, such as Amazon’s acquisition of MGM.

Lionsgate acquired Starz in 2016 for $4.4bn, but the move has been far from profitable, with the combined company now valued at just over $3bn. Burns said that he saw “opportunity to potentially unlock significant shareholder value” for Lionsgate by untangling itself from the Outlander and Power service.

Whether the price is right is another question. The rumour mill had gone rather quiet since news of the sale emerged late last year, but Roku and private equity firm Apollo Global Management recently emerged as a potentially interested party, swiftly followed by Canal+ owner Vivendi.

This week also saw TelevisaUnivision strike a deal to acquire the Spanish-language streamer Pantaya, which was launched by Lionsgate and Hemisphere Media Group in 2017. Lionsgate, however, sold its stake in Pantaya last year for $124m – and if you’re sensing a pattern here it’s because leaving Starz behind would represent the next step for the studio towards a refocus on its core business as an independent producer and distributor.

As the sector’s competitiveness continues to soar, it will be little surprise to see more services coming up for grabs as current owners rethink their broadcast and streaming strategies. While one more major deal akin to Discovery+ and HBO Max might emerge, the likely possibility is that some of the smaller regional streamers and genre-focused services could whet M&A appetites.

Love Is Blind

A buyer’s market

Of course, as noted, just because something is up for grabs doesn’t mean it’s going to sell.

When Red Arrow Studios went on to the market in 2019, it was with an initial valuation of €325m ($390m). However, one pandemic, several years and some unconvinced potential buyers later, and interest has only rekindled in recent months.

With the original asking price deemed by some to be too steep, a variety of private equity players appear to have now entered the fray to explore an acquisition of its North American assets. These include LA heavyweights such as Love Is Blind and Married At First Sight prodco Kinetic Content, as well as 44 Blue Productions and Left/Right, the producer of FX and Hulu’s doc Framing Britney Spears.

A lower price tag, somewhere in the region of €230m ($240m), is attached but the process that began in January is still ongoing, with a slimmed down list of buyers subsequently opened up again in recent weeks.

Like Lionsgate, the process seems to be taking longer than some expected. Price, of course, is likely to be the main issue, but the about-turn by markets on content spending is also likely to come into play here. For some deals emerging this week, all that will be too late and the deals will get done regardless.

For others, the concerns over streamer content spending will directly correlate to the eagerness of parties to get a deal done. Scripted companies with proven success will of course remain highly sought, but TBI hears from multiple sources that it is documentary firms that are in most demand.

Capable of producing cut-through content at a lower cost than scripted, they are a fitting metaphor for an industry that seems to be taking its M&A activity much more seriously now.