2010 Brings More M&A: Forecast

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After a lethargic 2009, merger and acquisition activity will rebound somewhat in 2010 --including media and entertainment M&A -- according to a new forecast from PricewaterhouseCoopers. Not surprisingly, the uptick will favor strategic buyers with cash on hand, who will have the best chance of convincing banks to pony up.

In keeping with the general atmosphere of extreme caution, PwC expects these buyers will focus on conservative acquisitions that bolster their existing business, rather than branching out into new areas; by the same token, there will likely be more mergers with peers -- meaning companies that are roughly the same size -- due to the simple fact that most of the smaller companies have already been snapped up (or have gone under).

Although the increase in M&A activity will be enabled in large part by recovering credit markets, PwC believes finance will continue to be the main barrier to deal-making -- thus the likely domination by companies in financial fighting trim.

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Weaving an extended metaphor, Bob Filek, a partner with PwC's transaction services, stated: "Those who have built their balance sheets for a rainy day might come out of last year's storm to find the rainbow, and at the end of it, nicely valued acquisition targets that provide opportunities for revenue growth and enhanced productivity," as well as achieving cost savings.

No surprise -- 2009 was a down year for M&A: PwC cited stats from Thomson Reuters tallying the number of deals in the first eleven months of 2009 at 6,772, with an aggregate value of $614 billion -- down 24% and 38.4%, respectively, from 8,890 deals and $1 trillion total value in 2008. Within these figures, the number of private equity deals fell 32.7% to 1,171, and the total value of these deals fell 21% to $146 billion.

With things looking up somewhat in 2010, PwC identified a number of areas with the greatest potential for M&A activity, including entertainment and media. As in previous years, much of the M&A activity in the media arena will focus on building up content production capabilities and distribution systems -- both domestically and internationally -- as well as acquisitions targeting new media companies.

Among the other high-potential areas are consumer products, fueled by branded companies looking to gain scale and leverage with retailers, and technology, where M&A strategies will focus on control of data centers, end-to-end services, and picking up intellectual property.

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