The continuing triple wave of convergence, in-market consolidation and cross-border transactions suggest a strong M&A environment in 2018.
The trends that drove Telecom and Media M&A throughout 2017 will likely stay in play for the next 12-18 months, hinting at some robust deal-making activity ahead.
The industry catalysts which are expected to drive M&A activity going forward include in-market consolidation, convergence and cross-border transactions. The combination of these strong industry drivers and conducive markets, on both the equity and debt sides, will likely create a healthy M&A environment.
Past is Present
With in-market consolidation still a global phenomenon, industry structures may have scope to rationalize in some geographies. Scale at the local level generally spurs returns, and this will remain one of the main drivers of in-market consolidation.
This trend is expected to continue to play out in mobile, cable, and the broader media landscape.
Another trend is convergence in its various forms: Fixed/Mobile, Distribution/Content, Distribution/Digital, Content/Digital.
The key inputs of convergence transactions include: scale, efficiencies, and maximization of the customers’ mind- and wallet-share. Disruption is also a factor which has a significant and evolving impact on where value lies in the TMT ecosystem.
The question for 2018 is: If you are a player in one of the verticals of the TMT value chain, how relevant do you need to be in other verticals in order to protect your core business or grow?
We’ve seen relatively limited cross-border M&A in the TMT space so far. So, will the need for scale in a continuously disrupted and converging world make cross-border M&A more appealing?
Overall, the message for 2018 is that the continued presence of strong industrial factors, coupled with conducive equity and debt markets will drive a robust M&A environment in the coming year.
For Morgan Stanley Research on key Tech, Media and Telecommunications themes ask your Morgan Stanley representative or Financial Advisor. You can also visit the TMT Barcelona 2017 page.