PwC Unveils U.S. Entertainment and Media Outlook

NEW YORK, March 3:
According to a new PricewaterhouseCoopers report, private-equity buyers were
very active in the entertainment and media space last year, investing nearly
$45 billion, up from $19.4 billion in 2006.

According to
PricewaterhouseCoopers' annual report, 2008 M&A Insights—U.S.
Entertainment and Media Industry,
private-equity firms will remain an active player in the entertainment and
media industry in 2008, focusing on middle-market companies largely in the
publishing, broadcasting and cable sectors. Private-equity deal volume
increased 7 percent to 159 total deals. Additionally, average private-equity
deal value more than tripled, rising from $245 million to $897 million in 2007.

PricewaterhouseCoopers
also noted that a total of 1,168 entertainment and media transactions were
completed in 2007, an increase of 16 percent from 1,008 in 2006, with the
publishing, Internet software and services and advertising and marketing
sectors driving the deal volume.

The publishing, Internet
software and services and advertising and marketing sectors together accounted
for 911 of the 1,168 deals or 78 percent of total deal volume. In terms of
disclosed deal volume and value, 2007 fell short of 2006, with 331 disclosed
transactions aggregating $108.1 billion versus 341 deals totaling $129.7
billion in the prior year.

There was an increase in
“mega deals” in the entertainment and media industry, with 23 deals valued at
more than $1 billion, including 14 valued at more than $2 billion completed in
2007, compared to 16 deals worth $1 billion-plus completed in the prior year.
As a percentage of total deal value, 2007 mega deals contributed 74 percent, up
from about 70 percent in 2006. Private equity completed seven of the mega
deals, representing nearly 50 percent of total mega deal value.

However, in the outlook
for 2008, with the threat of a prolonged economic downturn and the tightening
of the credit market in the U.S., there will be fewer mega deals in 2008. Deals
valued at less than $1 billion will be more common.

Digital convergence and
the growing importance of the Internet and online media led entertainment and
media companies to strengthen their digital platforms, triggering much of the
deal activity in 2007. As the importance of the Internet grows, entertainment
and media companies will make strategic purchases to enhance existing online
capability or enter the online market. Publicis Groupe, an advertising media
services conglomerate, entered the digital space in 2007 with its purchase of
Digitas, which specializes in digital and direct marketing.

PricewaterhouseCoopers
predicts that consolidation will continue in certain entertainment and media
sectors in 2008. In 2007, there was increased consolidation in the publishing;
advertising and marketing; broadcasting (middle market); and Internet software
and services sectors.

Due to the weakening of
the U.S. dollar and rate cuts by the Federal Reserve Board, there is also
increased interest from foreign acquirers. According to PricewaterhouseCoopers,
foreign buyers contributed more than 12 percent (143 completed deals) of total
U.S. entertainment and media deal volume (1,168 deals). Currently, 34 U.S.
deals involving foreign buyers were announced in 2007 that are pending or
partially completed.

"2008 is a wildcard,”
said Thomas M. Rooney, the transaction services leader of
PricewaterhouseCoopers’ U.S. Entertainment and Media Practice. “The changing
economic and debt markets coupled with the pending outcome of potentially
industry transforming deals such as the recent Microsoft's $45 billion bid for
Yahoo or the pending $13 billion XM and Sirius merger make a challenging year
for M&A predictions.”

—By Irene Lew