After hitting their lowest levels last year since the dot.com crash of 2002, UK media M&A deals are expected to bounce back in the coming months.
PricewaterhouseCoopers LLP says a rise in M&A activity during 2010 will be stimulated by "the transformation of traditional media companies", a continuing reduction of debt levels and a steadily strengthening economy.
Commenting that there is "considerable unfinished business" in terms of consolidation in media, partner Nick George notes that traditional advertising revenues are still eroding and old media companies must transform to survive: "This could include buying new companies that offer digital services or products, or swapping assets to become more efficient and gain ground in a particular field."
Data from PricewaterhouseCoopers highlight that last year's deal volume in the media sector fell 36 per cent on 2008's figures as cost cutting and capital restructuring projects took priority over acquisitive expansion. While 45 deals worth €4.1 billion were recorded in the UK in 2008, last year saw just 29 completed media transactions totalling €2.7 billion.
"Trade buyers might have been expected to make a bigger splash last year given the generally low level of PE competition," remarks Andy Morgan, TMT corporate finance partner at the professional services firm. "But only exceptional assets were saleable and, with all but the most desperate vendors unwilling to countenance credit-crunch pricing, negotiations often ended in deadlock."
He concludes that more sales of non-core assets - and even "the wholesale breakup" of some companies in the sector – are anticipated as banks reach the end of track in terms of refinancing and restructuring options. 
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