Media and Telecoms: A Q2 M&A outlook

Telecoms M&A activity has been impacted less by the macro-economic environment than other sectors.

We’ve seen some significant deals announced over the last few quarters. In Q1, we saw deal volumes slightly increase from previous quarters with overall deal value close to pre-pandemic levels.

But what is our view from here?

We continue to have a positive outlook for telecoms M&A given the strong structural drivers of activity. This includes consolidation to increase scale, convergence into adjacent sectors, carve outs to realise value and JVs to drive investment off balance sheet. These drivers underpin acquisition and divestment opportunities in the sector.

We expect consolidation to be a particularly strong theme this year and are seeing increasing signs of this.

Did you know that in the UK, there are over 50 alternative network operators rolling out fibre with plans to cover the country nearly three times over? Our analysis indicates this isn’t economically viable, so we expect to see widespread consolidation that, over time, will drive the market towards a more stable structure with a handful of operators.

We saw deal activity down in Q123 compared to the previous year. However, we believe that confidence is returning to the sector, with underlying structural M&A drivers such as digitalisation, innovation and consolidation being stronger than ever.

Private capital interest in media assets remains high and there is a particular focus on hot subsectors such as information and data, content/IP, and technology-led areas such as video gaming and music publishing.

That said, the last year has been plagued by stalled M&A processes. The only way we can return to pre-2022 M&A volumes is by rebalancing the buyer-seller- bid-ask spread and buyer’s factoring in increased debt capital costs. We’re seeing a narrowing in this which needs to play out further over the remainder of 2023.

We expect to see highly strategic deals and those involving high-quality target businesses to continue during H2.

But what about the metaverse and the push for more digitalisation in media? We’ve seen investment in the metaverse continue at pace, and increasing appetite from companies who want to explore innovative ways to connect with consumers and future-proof business models. We expect this to result in opportunistic M&A activity – so watch this space!

AI is another element that’s making waves in the media sector with its growth, ongoing news stories and high profile. It’s also led to a number of companies reflecting on AI, wondering what opportunities exist in their market, how they can embrace the technology and gain a competitive advantage. While we’re at the very beginning of AI and its story, there’s an increase in the appetite for investment in this technology across the board!

Please contact a member of our team to find out how we can help with your organisation's 2023 M&A agenda.

You can also explore our other M&A market outlooks for 2023.