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Making sense of M&As

Mergers and acquisitions are becoming more and more of a factor in the factual production landscape. Here, Thomas Dey, CEO of advisory boutique About Corporate Finance, discusses what the big players are looking for in an acquisition, and what regions might be ripe for future factual expansion.
March 1, 2011

Mergers and acquisitions are becoming more and more of a factor in the factual production landscape. Here, Thomas Dey, CEO of advisory boutique About Corporate Finance, discusses what the big players are looking for in an acquisition, and what regions might be ripe for future factual expansion.

W ith a global squeeze on production budgets, factual TV offers a lower cost and shorter timescale compared to some of the other genres that take longer to produce and have higher budgets attached to them. Also, there is added appeal through the distribution of the original content, with low-cost dubbing, long shelf-life and format sales to other territories.

So what are the forces driving mergers and acquisitions (M&A) interest in the factual TV landscape and more specifically, the companies that produce it?

Well, the ownership of intellectual property and the ability to demonstrate that your content appeals to more than one territory is pretty critical in appealing to the consolidators wanting to build a TV production group. Good relationships with commissioners are also an enticing prospect for buyers.

Some factual content – usually in the reality space – has a short shelf life and limited international appeal. However, some successful reality formats do well internationally while documentaries can often have a long shelf life and can be easily adapted to international distribution. Increasingly, those looking to buy companies are looking for producers that make long-running, re-commissioned series, rather than one-off titles. A strong track record of this gives comfort on future results, as profits tend to be better on later series through efficiency and lower set-up costs.

The two main critical territories for factual TV appear to be the U.S. and the UK. Companies in either of these territories tend to target each other for M&A activity first before looking elsewhere around the world. The UK is well respected for idea creation and intellectual property retention; the U.S. for idea creation, big budgets and big audiences.

Europe already has a number of sizeable players (Endemol, Eyeworks, Talpa, Banijay) which are all interested in linking in with the global play for factual content. European groups seem to focus on the UK first, building some mass before taking on a large territory like the U.S.

So, where are the next big players coming from?

A look at the emerging territories of Brazil, Russia, India and China (BRICs) shows that there is undoubtedly potential for M&A activity to fuel growth in factual content for the domestic and international marketplace in these areas.

Brazil does have a big market but it tends to have a strong focus on telenovelas and scripted soaps that have very high viewing figures. Still, for new entrants who are confident they can tap into this impressive audience, there is potential.

The Russian TV landscape has proven that, while formats succeed, original content does not do so well. However, there are clearly high net worth individuals that are interested in developing the media space, and could fund significant groups going forward across all genres.

India has so far concentrated on the film and post-production space, and not so much on factual. It has a fast-growing media industry which will see it develop the breadth of its media production to provide a greater TV showing – and therefore a stronger factual output.

To date, the interest from China has been focused on the big-name broadcasters and recognized brands. There will be a maturing however, and we should expect a significant play from this territory going forward.

Thus, for the foreseeable future the U.S., UK and Europe will continue to dominate this space as the biggest players in factual TV. However, one of the BRICs – perhaps China – will certainly be entering the M&A space once the groups get into the US$1bn-plus size.

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