M&A Mega-Deals Might Slow in 2020

iStock

After ViacomCBS and Disney-Fox, Wall Street expects "fewer giant-dollar" buys in the near future.

With media and telecom mergers the talk of Wall Street — including much ink spilled over the $11.7 billion recombination of Viacom and CBS on Dec. 4 — one would think 2019 was a banner year for such activity.

But both the volume and the value of deals were down compared with 2018, and activity isn't expected to grow in 2020, a Jan. 23 report from PricewaterhouseCoopers predicts.

While MGM, Lionsgate and Univision are considered in play, most of the large acquisitions were unveiled in 2018 or before — AT&T buying Time Warner, Disney purchasing most of 21st Century Fox — so M&A has likely peaked in the near term (PwC tracks announcements, rather than closing dates).

In 2020, "We do not see any game-changing opportunities. Most of what remains is smaller, and much of that has limited usefulness in the new media ecosystem or is just richly valued," wrote S&P Global Ratings analyst Naveen Sarna in a Jan. 22 report. Former Wall Street analyst Hal Vogel, CEO of Vogel Capital Management, says he also expects "more smaller deals" amid "fewer giant-dollar deals" this year.

Beyond what's now known as ViacomCBS, some of the more notable deals in 2019 included Sinclair Broadcast Group paying $9.6 billion for several Fox regional sports networks; Viagogo snapping up StubHub for $4.1 billion; and Amazon, Sinclair and the New York Yankees acquiring Yes Network for $3.5 billion. Nevertheless, PwC says volume sunk 27 percent in 2019 to 635 deals valued at $91.9 billion, which is off 25 percent.

Disney, for one, may not be done shopping as it could look to acquire some small content companies to further feed its push into direct-to-consumer streaming. And Ben Weiss, chief investment officer at 8th & Jackson Capital Management, says "sub-scale" media companies, including ViacomCBS, MGM and Lionsgate, "will continue to flounder in the public market" unless they show a willingness to grow via acquisitions.

Many see M&A value in sports going forward on the heels of equity firm Silver Lake saying on Nov. 27 it will pay $500 million for a 10 percent stake in City Football Group, valuing the owner of Manchester City and other soccer teams at $5 billion. And DraftKings, which operates fantasy sports sites for real money, said Dec. 23 it would merge with Diamond Eagle Acquisition in order to go public in 2021 at about a $3.3 billion valuation.

Rupert Murdoch's Fox Corp. agrees that gambling is a growth opportunity, thus it teamed with The Stars Group to launch Fox Bet in September. PwC's M&A report also forecasts "a growing opportunity in online gambling as more states ease restrictions."

This story first appeared in the Jan. 29 issue of The Hollywood Reporter magazine. Click here to subscribe.