Exits, M&A drive deals in media & entertainment

After a brief lull, private equity (PE) investors have evinced interest in the media & entertainment space, picking up stakes in companies operating in that segment. PE and venture capital investments in media companies nearly doubled between January and July, touching $86 million, compared with $46 million in the corresponding period last year, according to Venture Intelligence data.

While lower-than-the record investment activity seen in January-July 2013, when the total deal value was the highest in five years at $258 million, the pick-up in activity this year, say analysts, suggests the emergence of digital and the need for compelling content seems to be driving up interest among investors.
 

Investment bankers tracking the sector also allude to consolidation in the media space for the rise in deal activity. Multiples PE's investment, for instance, in PVR Cinemas topped the league table this year in terms of deal value. In June, Multiples PE invested $54.6 million in PVR Cinemas, higher than the $25.5 million it had pumped into the company for a 15.8 per cent stake in 2012. PVR had acquired Cinemax, prompting Multiples PE to step in. What percentage stake it picked this year is unclear.

PE / VC Investments in the Media & Entertainment Space
Time Period	No of Deals	Amount(US$M)
Jan - July 2015	6	86
Jan - July 2014	5	46
Jan - July 2013	9	268
Jan - July 2012	7	155
Jan - July 2011	2	118
Jan - July 2010	8	125
Source: Venture Intelligence

Harish H V, partner, Grant Thornton India LLP, says, "Digital is playing a big role in media and entertainment. Clearly, the delivery of content across platforms is changing, thanks to the influx of technology and the need for content across platforms. Leading to a situation where media companies are having to shed old models and adopt new business practices, which in a sense makes them a top draw for PE investors.

That media and entertainment, telecommunications and technology are increasingly converging on to mobile phones improves the prospect for businesses operating in the space, according to analysts. Investors are predictably excited. Even exits from the sector were high, peaking to $294 million between January and July, the highest in five years. According to investment bankers, exits are happening at returns of 20-25 per cent.

India's entertainment & media sector is likely to grow steadily over the next five years, according to a report by the Confederation of Indian Industry and PwC, touching $36.5 billion by 2018. The rate of growth would be 15 per cent a year, the study said.

PE / VC Exits in the Media & Entertainment Space
Time Period	No of Deals	Amount(US$M)
Jan - July 2015	8	294
Jan - July 2014	1	20
Jan - July 2013	2	38
Jan - July 2012	1	25
Jan - July 2011	6	53
Jan - July 2010	4	127
Source: Venture Intelligence

By opening up and relaxing the entry barriers for foreign investments (foreign direct investments as well as indirect investments) in certain key areas of this sector, the Government of India has provided the sector the much-needed impetus to growth, investment bankers said.