Media Industry M&A Interest Heats Up
In the face of an uncertain future, 2016 may be the time to act for both buyers and sellers, suggests AdMedia's annual survey.
The media industry experienced an uptick in M&A activity this year, and 2016 will be even busier—at least according to data from AdMedia Partners' annual survey of media executives.
In its 22nd annual survey, AdMedia reached out to over 6,000 advertising, marketing, and digital and print media executives during Q4 2015—both in the U.S. and abroad—with an online poll designed to get their take on the industry's M&A outlook.
Over two-thirds of respondents were approached by a buyer this year—68 percent, to be exact, up from 63 percent last year—while more than half (53 percent) were approached by a strategic buyer, as opposed to a financial investor. Additionally, 29 percent of respondents said they received an offer, up from 23 percent last year.
Despite the significant increase in interest, however, the number of respondents involved in actual transactions remained flat. Just 29 percent of respondents made one or more acquisitions in 2015, down from 35 percent last year. The 12 percent of respondents who were acquired by a strategic buyer was just slightly above 2014's 11 percent.
Said one respondent, "Strategic buyers will more and more often come from outside the industry—consultants and other businesses will morph to get a piece of the explosive communications business."
Perhaps most notably, the number of respondents involved in mergers saw a dramatic decrease, down to just three percent of respondents; 11 percent reported being involved in a merger last year.
The outlook for 2016 is somewhat optimistic. Nearly two-thirds of respondents (63 percent) expect to seek an acquisition target next year, consistent with the 62 percent in last year's survey. At the same time, though, 54 percent plan to explore a sale of their company in 2016, up sharply from 40 percent in 2015, and only 21 percent will seek investment funding, down from the 35 percent in last year's survey.
The most common targets for acquisition are in analytics and digital, with 51 percent of respondents saying they're considering expanding or acquiring businesses in each of those categories. Social marketing and custom content/native advertising follow closely behind, at 46 percent each.
Although still relatively minor in terms of overall interest, market research was the category that saw the largest increase, with 25 percent of respondents considering acquiring businesses in that area, up from 18 percent last year. Interest in mobile marketing acquisitions saw the biggest drop, from 50 percent last year to just 36 percent for 2016.
"The drive will be to continue to pursue broader service offerings," said another respondent. "Buyers will be looking to purchase firms in areas where they do not have a capability. Sellers will be looking to develop a more integrated offering to become more attractive to buyers."
Regardless of their own plans, 81 percent of respondents anticipate that M&A activity by strategic buyers will be up in 2016. Less than half (44 percent) expect the same increase in activity on the part of financial investors.
Unsurprisingly, media executives expect their business to become increasingly digital in the near future. Over half (54 percent) say that their businesses are less than 40 percent digital currently. Just 26 percent say that will still be the case two years from now, while nearly one-third (31 percent) predict that their business will be 80 percent digital by then.
Similarly, a 63-percent majority say that, currently, less than 20 percent of their business takes place on mobile devices, but only 24 percent expect things to remain that way by 2018.
"New programs streamlining content distribution, plus advances in technologies like virtual reality, will probably change the landscape."
For the first time in at least a decade, over three-quarters of respondents would advise both buyers and sellers to act now (79 percent for each), a strong indication that the stage could be set for a boom in activity next year with eager parties on both sides.
"The pace of change is great, so companies in a strong enough position to sell should do so," concluded one executive. "The future is more uncertain than ever."