The current M&A frenzy does not appear to be dying down anytime soon. In fact, those in the business of buying and merging companies (or underwriting those buying and merging), argue we’re closer to the first pitch than the bottom of the ninth.
“I think this is only the beginning,” Jeff Sagansky, partner at private equity firm Eagle Equity Partners, told TheWrap’s Sharon Waxman during a panel titled “Acquire or Die: Navigating the Era of Mega-Mergers & SPACS,” presented by Gerber Kawasaki. “You’ve got massive liquidity in the system, Feds still printing money every month. Corporate borrowing rates at an all-time low. Cash on the balance sheets at an all time high and you’ve got dry powder in these private equity firms on a worldwide basis.” Sagansky estimated the total amount of money to spend globally is somewhere in the neighborhood of $2.4 trillion.
“That is driving incredible stock market returns and a lot of the M&A. The other thing that’s driving it as we’re at an inflection point for all the legacy media companies, where they basically have to take their incredibly profitable core business, their cable business, 40% margins, and go direct to the consumer. That is a really expensive, difficult thing to do,” he continued.
The M&A frenzy hit another high this week with the bombshell deal (that came out of nowhere) between two of the Big 4 Hollywood talent agencies, CAA and ICM (you can read more about that here). That deal came on the backs of Amazon’s $8 billion purchase of film and TV studio MGM and Discovery’s $43 billion merger with WarnerMedia, which represents AT&T’s departure from the entertainment world after only three years.
Others in the space agree, including Kevin Mayer and Tom Staggs, two former Disney executives who are partnering on a joint venture media company that already includes some A-list driven production outfits like Reese Witherspoon’s Hello Sunshine, and is circling Will Smith’s Westbrook Media.
“There’s enormous forces, economic forces that are causing this to happen on the legacy media side. Certainly, scale becomes important. The direct-to-consumer shift is real and underway in a substantial way,” Mayer, who is also chairman of DAZN, said. “That does create need for scale. It creates need for new capabilities. Some of those capabilities are expensive to acquire, only so many people can have these capabilities, so I think it does force a consolidation on the strategic side.”
For his part, Staggs (who is also a board member at Spotify), said some of the M&A is being fueled by all the new players in the space.
“We’re at the beginning,” he said. “You’re seeing new folks, whether it’s people that are enabling the creator economy, participating in the creator economy, there’s new business models evolving for people to participate in it. That’s going to continue to fuel what you’ve been seeing.”
Faiza Saeed, presiding partner, Cravath, Swaine and Moore LLP, isn’t surprised by current frenzy of activity. It’s usually a merger or acquisition that inevitably leads to more, for various reasons.
“Combinations inevitably yield dispositions,” she said. “Sometimes it’s because a combination doesn’t work. Sometimes it’s because there was always an intention to shed other assets. There’s also a lot of sub-scale content companies right now that do need M&A in order to be competitive. It’s more of a continuum, it’s always peaks and valleys.”
Watch an excerpt from the panel above and the full conversation here.
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