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Media mergers: The wave rolls on
Strategic and financial factors suggest that the era of media mergers is far from over. More than 100 media companies around the world have upward of $1 billion in revenues, and the entertainment and media businesses are still fragmented compared with other industries such as pharmaceuticals and aerospace. The cooling of equity markets has left most major media companies trading at elevated stock market prices based on cash flow multiples that can't be justified by growth alone. What investors are counting on, and executives are pursuing, is a burst of revenue through new digital services.
The take-away: The take-away M&A in the media industry seems likely to accelerate following a US court decision removing the rule prohibiting media companies from owning cable systems and local broadcasters in the same market. As a corollary of the next merger wave, even the biggest and most acquisitive companies are simultaneously looking to sell businesses that no longer fit the strategic bill.
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© 1992-2003 McKinsey & Company, Inc
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