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...online offering, be that in content, distribution, advertising, publishing or broadcasting, but given that the possible channels to market seem to increase at staggering rate, the question is not just "What do we need to do" but just as importantly "How do we do it?"
As Fraser Davidson, investment director at private equity firm August Equity, puts it: "The digital space is maturing remarkably and all good media companies, be they traditional or online, are increasingly relying on the internet to reach customers."
According to a recent "Media Insights" study compiled by PwC, 21% of European media deal volume last year had a "strong digital component", with marketing services especially moving towards digitalisation.
The media sector does not operate in a bubble, however, and as expected, many agree that the current market conditions have affected valuations in the sector to some degree over recent months but there is no doubt that the move to digital is stimulating M&A activity.
Aside from the European mid-markets, which are in the midst of a sizeable consolidation wave, blockbuster deals such as Microsoft's US$41.1bn bid for Yahoo! continue to emerge as Microsoft prepares to pay the price for mounting an offensive against web search leader Google.
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Mike Reid, a director at private equity group 3i, says: "Acquirers need to look to bolt-on acquisitions because inactivity leads to downwards pressure on share prices, whereas doing something is perceived as good news."
He goes on to say: "We are seeing both minority stake acquisitions in order to gain early access to innovative ideas, as well as larger deals to transform business models to move towards a more balanced online offering."
Some would say that turbulence throws up opportunities but for those firms that are not at the forefront of the sector, backing one horse can be a daunting task so it may become increasingly attractive to get involved in club deals or spread their presence over a wider area.
The third and fourth quarters of last year also saw private equity firms raising sizeable funds, so with the level of available capital we may also see moves towards more private equity and trade partnerships.
"There is no question that as the economic environment gets tougher for the traditional players, we will see significant amounts of cash being invested in digital assets," says Jonathan Goodwin, global head of media investment banking at Jefferies International.
Part of the reason for the increased spending is that firms' efforts to acquire and retain customers in a down cycle may lead to an acceleration in the investment rate as digital is viewed as the easiest way of achieving that.
Increasing investment levels in a downturn in order to retain customers could be viewed as quite...
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