Convergence in TME is one the rise but one of the sector is doing significantly more deals

The interplay between TME’s constituent sectors is often far from simple, with convergence plays driven by a number of factors. The top convergence deals of 2014 through to 2015 (to date*) underscore this point. These transactions include technology firms acquiring media and entertainment companies, and both media and entertainment businesses targeting technology.

Top of the table for 2014-2015 is a technology entertainment transaction: US-based Scientific Games Corporation’s more than US$5bn merger with gaming operator and distributor Bally Technologies.

The aim of the deal is to create the world’s leading gaming and lottery entertainment and technology company. Also in cross-sector megadeal territory is South Korea’s internet portal operator Daum Communications’ US$3.2bn merger with mobile software applications provider Kakao Corporation (a media-tech tie-up), and in the US, publisher Media General’s US$2.4bn acquisition of TV station operator LIN Media.

While convergence is a definite trend, the majority of participants in Reed Smith’s Wired Up report are considering acquiring closer to their main line of business. However, the picture is far from uniform and cross-sector intentions vary widely across the technology, media and entertainment sectors.

Technology is an ivory tower, with businesses highly conservative when it comes to reaching outside the core. Almost all (99%) say their next acquisition is likely to be another tech firm. However, the acquisition of Nokia’s mobile devices business for US$6.1bn by Microsoft stands as a case in point that diversification from within the technology sector has enough breadth to offer advantages such as new delivery platforms and IP licences.

Media firms are more willing to branch out. While 77% are targeting in-sector acquisitions, 19% are considering acquiring an entertainment target with 4% looking to buy in the technology subsector.

Entertainment businesses are the most outward looking of the TME trio. More than a third of companies are planning non-entertainment purchases, with 21% targeting media and a further 13% planning to pursue technology firms.

*June 2015