- Short-term tactical challenges make way for long-term strategic opportunities
- Media and entertainment executives heighten their focus on structural industry challenges resulting from digital transformation
- Pursuit of acquisitions expected to be the highest in years
Confidence in the global economy among the world's leading media and entertainment (M&E) companies is at its highest point since the global financial crisis. This wave of confidence is fueling their deal pipelines and creating an expected record number of mergers and acquisitions, according to a recent survey of more than 1,600 senior executives, of which 70 were from M&E companies, in more than 60 countries conducted by EY for the 12th Global Capital Confidence Barometer.
When asked their perspective on the state of the global economy, an overwhelming 77% of executives surveyed said it was improving, with 21% indicating it is stable and only 2% that it is declining. This is a significantly better outlook from six months ago when only 52% of executives said the global economy was improving, 45% that it was stable and 3% that it was declining.
A vast majority of executives see the global mergers and acquisitions market remaining strong for the remainder of the year with 96% indicating it will either improve or remain stable and only 4% that it will decline. Half of all respondents expect to actively pursue acquisitions in the next 12 months, compared with less than half of that (23%) two years ago.
Companies have meaningful deal pipelines, with 29% indicating they have five or more deals in their pipeline right now and 60% of respondents expect their number of deals to increase during the next 12 months.
Additionally, long-term opportunities from ongoing growth resulting from global digital media adoption, combined with overwhelming confidence in the economy, are driving a significant increase in the number of deals in the pipeline and companies' intentions to invest.
Tom Connolly, Global Media & Entertainment Transaction Advisory Services Leader at EY, says:
"Media and entertainment companies have set their sights on aggressive growth both organically and through mergers and acquisitions. Companies are looking for deals that will both complement and enhance their digital capabilities. More than $10 billion of deals are projected and the number of executives expecting to make an acquisition during the next year has more than doubled, indicating not only confidence in the economy but an enthusiasm for the future."
The report is a survey of senior executives from large media and entertainment companies around the world that gauges corporate confidence in the economy, identifies boardroom trends and provides insight into companies' capital agenda.
Other key findings include:
Executives remain confident in key economic indicators and the performance of their businesses. Eighty-two percent are confident in corporate earnings; 76%, credit availability; 76%, short-term market stability; and 44%, equity valuations and stock market outlook.
The greatest economic risks to media and entertainment businesses are political instability, 39%; volatility in commodities and currencies, 27%; slowing growth in key emerging markets, 13%; economic situation in the Eurozone, 11%; regulatory environment, 9%; and deflation, 1%.
Despite the high level of confidence in the global economy, cost cutting ranked highest (34%) when executives were asked to list areas of focus in their boardroom, followed by acquisitions, 25%; changing commodity prices, 22%; returning cash to shareholders, 13%; and strategic divestment, 6%.
The top markets in which companies will be most likely to invest are China, the United Kingdom, the Netherlands, Australia and the United States.
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