Media and leisure giants have been in a close to fixed cycle of mergers and acquisitions because the flip of the century. Nevertheless, 2024, might be remembered for the offers that didn’t occur.
In July, Paramount International reached a historic settlement for an $8 billion sale to David Ellison’s Skydance Media after nearly a yr of fitful negotiations. There’s little doubt that extra studio-network conglomerates — suppose Warner Bros. Discovery and NBCUniversal — would have been concerned in critical M&A negotiations (presumably even for Paramount) if the regulatory surroundings had been extra hospitable.
However by the fourth yr of the Biden administration, key antitrust regulators on the Division of Justice and the Federal Commerce Fee had despatched a transparent message to the enterprise neighborhood: Curb your urge to merge.
“It is a regime that was ideologically motivated to say large enterprise is inherently suspect and that giant corporations current dangers economically, politically and socially,” says Mark Whitener, a senior coverage fellow at Georgetown College’s Middle for Enterprise & Public Coverage. He beforehand labored for the FTC beneath the George H.W. Bush and Clinton administrations.
The DOJ and FTC have taken robust positions which are a departure from many years of previous follow for weighing the potential hurt to customers. Their more durable stance on antitrust issues has led regulators to return out swinging in opposition to proposed mergers comparable to JetBlue’s transfer to accumulate Spirit Airways or grocery big Kroger Co.’s tried takeover of Albertsons. In 2021, the DOJ fired a warning shot to Hollywood when it blocked Paramount’s sale of Simon & Schuster to Penguin Random Home. Personal fairness big KKR wound up scooping up the storied writer for $1.6 billion.
As all the time, the numbers inform the story. For the primary half of 2024, the greenback worth of M&A exercise throughout all sectors rose by 5% in contrast with the primary half of 2023, to $1.3 trillion, in line with analysis by PwC. However general transaction quantity fell by 25%, marking the third yr of a downtrend.
For Hollywood, the dilemma of the Biden years has been that the hammer on big-dollar dealmaking got here down simply because the legacy studios actually wanted a lifeline, placing extra stress on corporations that have been already struggling within the face of technological disruption, earnings erosion and, in some instances, heavy debt hundreds. This turmoil has led loads of trade insiders who establish as liberal Democrats to query the reflexive hostility towards large enterprise (particularly Large Media and Large Tech) expressed by far-lefties comparable to senators Elizabeth Warren and Bernie Sanders.
“Whereas they bow all the way down to progressive doctrine, we’re drowning,” says a senior chief at one of many trade’s largest studios. “It’s wonderful that they will’t see the fact.”
As Donald Trump prepares for a return to energy subsequent month, there’s heightened anticipation for alerts from his rising administration about its regulatory philosophy. Historically, Republicans have been extra amenable to the wants of enterprise, however their conduct is much less predictable at a time when populism is profitable votes. What’s extra, the dynamics for Large Media and Large Tech are sophisticated by the truth that Trump has had a contentious relationship with main gamers in each sectors. There’s little question that Trump’s fury at CNN contributed to the DOJ’s finally unsuccessful effort to dam the wedding between its mother or father firm Time Warner and AT&T.
On Dec. 10, Trump disclosed his plan to nominate Andrew Ferguson to succeed Lina Khan as chair of the FTC. Ferguson, already a member of the fee, has been important of Khan for what he describes as waging “a regulatory assault on American enterprise.” That implies that the fee will take a distinct strategy beneath his management.
As the brand new yr approaches, Hollywood’s fortunes are slowly however certainly enhancing. Jon Miller, a veteran investor who’s CEO of Built-in Media, says that 2024 was the yr that legacy studios comparable to Disney and Comcast’s NBCUniversal took the arduous steps to handle the declining fortunes of their linear cable channels. On the similar time, streaming platforms are beginning to eke out actual earnings. Meaning circumstances are even riper for discussions of intriguing new combos.
“You’ve [cable] that has supported the enterprise for 30 years hitting an actual inflection level. And you’ve got your progress space hitting a constructive inflection level,” says Miller. “The desk has been set for vital M&A within the subsequent 12 to 24 months — and never simply all-out gross sales but additionally offers to reconfigure the portfolios and property of leisure corporations.”
Georgetown’s Whitener says there’s real debate in authorized and coverage circles that regulatory businesses — that are alleged to be faraway from hardcore partisanship — have gotten yet one more political battleground. Whitener notes that previously, the FTC and DOJ would counsel cures or concessions to a transaction that will permit corporations to maneuver ahead with a merger. However these sorts of compromises have fallen out of favor.
“Antitrust enforcement moved from 4 many years of consensus and rational considering that was bipartisan and predictable,” Whitener says. “While you transfer to a extra ideological-driven populist strategy, then you definitely danger every kind of surprising outcomes.”
