Mergers and acquisitions: Analysis of capability acquisition as intent indian entertainment and media industry

Abstract

The objective of this CCS was to explore the intent behind M&As from the angle of capability acquisition. We chose Indian Media and Entertainment Industry as the scope for this study because of the dramatic changes in the industry in the last decade or so. These changes have been driven by multiple factors such as shifts in consumer preferences, demographic shifts, technological changes and globalization. As a result of all of this, consolidation and convergence have been the key words in this industry, hence presenting an interesting and large set of deals to base our study on. Our worked followed two parallel streams. In one, we studied in depth the various sub-sectors in the media industry (television, films, advertising, animation, internet, etc.). Each of the sub-sectors has seen many changes that have consequently led to changes in Key Success Factors (KSFs) for that sub-sector. And this has necessitated having new capabilities. For a fast moving industry, acquisitions and alliances are one of the most common ways to acquire such capabilities. The other stream of work involved listing all the deals done in this space. Beginning with a comprehensive list of 150+ deals done in this sector post 2004, we put multiple filters to bring the list down to deals which were relevant to the context of our study. Finally, 17 deals were chosen to be presented for this study and these have been thoroughly analyzed in this report. We have used content analysis as the methodology to ascertain merger motives in our study. Statements made by top management at the time of deal announcements, with regards to merger rationale, expected synergies and future strategy has been studied. We have also looked at discussion in the annual reports to further understand the merger intent. Finally, we looked at post deal developments to see if new capabilities arising out of the deal played a role. We have found that companies undergo vertical integration to capitalize on mismatches in the industry value chain. This can be done to gain competitive advantage or for value addition. Capabilities are also acquired to fill gaps in the existing services offered (both in terms of specialized services or localized knowledge sought by clients), especially in a market moving towards integrates services, e.g. advertising. Technological convergence in the media industry is also one of the reasons for capability acquisition led M&As in the new media space (internet, mobile VAS, animation). These conclusions have been arrived at through the detailed analysis of selected deals in our report