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Social Media, Video Games: Areas Ripe for Mergers

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By Jason Beahm on February 17, 2011 5:52 AM

If your company is involved in social media or video games, it could be a busy year for you as they are ripe for mergers. That's always a double-edged sword, but in this economy, most attorneys are thrilled to see some action. Especially compared to the cost cutting we saw in 2010.

Entertainment and media companies are likely to go looking for deals in 2011, according to a recently-released report. "With the industry's fast-paced shift to digital -- and attractive levels of corporate cash reserves and private equity dry powder, (we believe) the catalysts are in place for more E&M deal activity" this year, says a study by PricewaterhouseCoopers, reports.

According to the report, international ventures, social media and videogames are going to be ripe for mergers in 2011. And that comes after a 2010 where the number of transactions in those areas was already up by 3%, though the total value of deals dropped by about $4 billion from $37.2 billion to $33.5 billion.

"As media content becomes increasingly interactive, look for business models to shift from 'business paid for' (advertising) to 'consumer paid for' (subscriptions and per-transaction payments) ... The comparably higher stickiness of consumer-paid models should lead to higher valuation multiples in certain sectors, said Bart Spiegel, of PricewaterhouseCoopers," reports.

Another study polled 500 media, marketing and technology execs offered further support of PricewaterhouseCoopers conculsions, finding:

  • 81% of those with revenues of $250 million or more expect to make an acquisition in the next 12-24 months
  • Only 27% said they expect to divest a property in the near term.

Reported advisory firm Jordan Edmiston Group and digital marketers Econsultancy.

So in-house attorneys... better get those pencils sharpened!

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