Hollywood M&A Value Hits Multiyear High in First Half

Hollywood Sign 2 - H 2015

Lionsgate-Starz, NBCUniversal-DreamWorks Animation and Wanda-Legendary help the sector to its highest January-June deal value since 2013.

Lionsgate-Starz, NBCUniversal-DreamWorks Animation and Wanda-Legendary — those are just some of the marriages struck this year as Hollywood has gone into deal mode.

In fact, the value of U.S. entertainment industry mergers and acquisitions during the first half of the year hit a multiyear high.

Total announced entertainment deal value reached $18.8 billion in the first six months of 2016, up 306.5 percent from $4.6 billion in the first half of 2015 and $8.1 billion in the first half of 2014. It is the highest mark recorded since the first half of 2013, when entertainment M&A value had amounted to $32.2 billion, according to Mergermarket. But about half of that 2013 figure was due to the $16.7 billion mega-deal that saw Comcast buy the remaining 49 percent of NBCU.

Bigger deals drove the first-half growth over 2015 as U.S. entertainment deal volume was about on par with 29 deals in 2016, compared with 28 in the first six months of last year. Mergermarket notes that there were several deals worth more than $1 billion this year, which drove the deal value increase.

Looking at figures from PricewaterhouseCoopers based on Thomson Reuters data, there were $7.1 billion worth of studio deals during the first half of 2016, up from $520 million for the same period in 2015 and $170 million for January-June 2014.

PwC’s broader category of film and content (including the sub categories film studio, content production, other content, production support/distribution and cable/premium networks) reached an overall M&A value of $12.4 billion for the first half of 2016, up from $823 million for the same time frame in 2015, as well as $4.2 billion in 2014. But this year's first half came in below 2013’s $17.4 billion, which was dominated by the Comcast-NBCU deal.

The biggest deals year-to-date, according to PwC: NBCU's $3.8 billion DreamWorks Animation takeover; Wanda's $3.5 billion Legendary acquisition; and Lionsgate's Starz deal, which was announced at a $4.4 billion value, but which PwC lists at a $3.2 billion price tag excluding debt.

Other entertainment industry deals this year have included Doha-based BeIN Media Group's acquisition of Miramax; TV station group Sinclair's $350 million deal for the Tennis Channel; and Raine Group's $100 million-plus investment in Ron Howard and Brian Grazer's Imagine Entertainment.

Plus, Viacom had been zeroing in on a deal for a sale of up to 49 percent in its Paramount Pictures, which it had planned to unveil before the mid-year mark. But the corporate drama at Viacom and the legal showdown between controlling shareholder Sumner Redstone and CEO Philippe Dauman has delayed such a potential deal.

"Studio deals have been fairly rare for some time — at least until recently," Barrington Research analyst Jim Goss wrote in a recent report. "Now Wanda is discussing its desire to purchase the 49 percent interest in Paramount Pictures that Viacom's management would like to use to raise cash. However, this issue is complicated by the wish of controlling shareholder Sumner Redstone that the acquisition of Paramount, which was very contentious at the time, not be undone."

Bart Spiegel, U.S. entertainment and media deals partner at PricewaterhouseCoopers, explains: "The activity we're seeing in the film and TV content space this year reinforces our position that the market places a premium on successful content and as players in this ecosystem focus on the long-term, consolidation becomes more attractive to capitalize on synergies and secure distribution channels."

Says Ed Mullane, technology, media and telecom sector editor at Mergermarket and Dealreporter: “Companies that are left in the cold — where their business models have been seriously threatened by platform shifts or by not having enough scale — have to start combining in the hopes that they can create a new company that has some relevance,"