Media mergers and acquisitions are common in the industry, with deals ranging from friendly to hostile. Strategic deals are made to create larger conglomerates, but integrating different types of media can be challenging. Struggling media companies may be acquired at a bargain by buyers, including private equity firms.
Consolidation is an inevitable feature of capital markets, and sometimes a particular industry is in a solid business period. Media mergers and acquisitions occur in different segments of the media industry, including mobile technology, television entertainment, online publishing and more. When one media company buys another and integrates that business into its own, the deal is a merger or acquisition. Some media mergers and acquisitions are friendly, while others are considered hostile, depending on the target company’s willingness to be acquired.
Media mergers and acquisitions can be done as strategic deals so that both companies bring something the same or similar to the table. Combining these two entities will create a larger conglomerate that can be more competitive. There should be synergies between the two media companies so that each company complements the other in some way. In this type of deal, neither the media company is in trouble nor is it using a business model that is becoming obsolete.
If a traditional media entity, such as an entertainment television company, expands to acquire a new media business, such as an online business, the integration may be less seamless. As media continues to evolve, traditional companies may attempt to grow through acquisition instead of investing in organic or internal growth. If, for some reason, the two businesses don’t go together well or the newly acquired business doesn’t generate the anticipated revenues, the buyer could then separate or sell it. This was the case between entertainment giant Time Warner and internet company AOL in 2009.
As some media technologies go out of fashion, there are struggling deals taking place in media mergers and acquisitions. When a media company’s business model is failing due to new technologies that are propelling traditional media, the value of the ailing company falters. The stock price becomes depressed and revenue starts to decline. If a new media company sees value in the traditional media entity’s business, management team, or content that is produced despite the medium used, it may consider a struggling business. In the event of struggling media mergers and acquisitions, the buyer is more likely to purchase assets or a business with a bargain, and the target company improves its chances of obtaining value.
Private equity firms can participate in media mergers and acquisitions. A private equity firm is an asset management entity that focuses on building a portfolio by buying distressed companies, turning the business around, and selling the company in the future. When there are underperforming pockets of the media industry, these sectors become attractive targets for media acquisitions by private equity firms.
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