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By: Meredith Senter and Erin E. Kim, Lerman Senter PLLC
This expert interview provides an overview of current market trends in the media industry and outlines the important aspects of this segment that make mergers and acquisitions in the industry unique.
Mergers and acquisitions in the U.S. media industry have been on the rise. Television M&A is returning after a hiatus due to quiet period restrictions related to the incentive auction held by the Federal Communications Commission (FCC). In the incentive auction that ended in April 2017 the FCC auctioned off television station spectrum for wireless use. Stations that waited out the prohibition on transfers during the incentive auction are now doing deals, as are stations that hoped to sell in the auction, but did not. We are also seeing deals involving the sale of the residual assets of television stations sold in the auction.
On the radio side, the Entercom-CBS Radio merger is the largest transaction in several years and will result in additional activity due to required divestitures. The two largest radio companies are operating on extraordinary debt loads that will need to be addressed at some point. We are also seeing smaller strategic radio transactions, in particular for key single stations and FM translators being acquired to improve a station’s signal.
There is also significant M&A activity involving program networks, cable operators, and other distributors.
Consolidation spree. Four major mergers are currently pending—AT&T-Time Warner, Sinclair-Tribune, DiscoveryScripps, plus the already mentioned Entercom-CBS Radio merger—with speculation about many others. These companies are reacting to an industry transformation marked by changing consumer viewing and listening habits and shifting revenue streams.
Scale as driver. Scale not only serves as a tool for reducing operating costs, but also protects leverage in negotiations over program rights and retransmission rights. There are also technologyoriented reasons for scale. For example, television companies want a nationwide footprint to be positioned to take advantage of technical developments associated with ATSC 3.0, which is a new TV broadcast standard. Other entities are vertically integrating to secure content (e.g., AT&T’s proposed acquisition of Time Warner as a specific play for content) or to secure control of the distribution platform for their content (e.g., NBCUniversal’s acquisition of a low-power television station and lease of spectrum rights to serve as the NBC network affiliate in the Boston market, replacing a longstanding independently owned NBC affiliate).
To read the full practice note in Lexis Practice Advisor, follow this link.
Meredith Senter, a member of Lerman Senter PLLC, has specialized in the representation of clients in the broadcast, cable, and telecommunications industries since 1980. He has represented clients, from individuals to CBS Corporation, in the purchase or sale of numerous radio and television stations and has served as the lead attorney on transactions ranging in size from under $1 million to over $1.4 billion. Meredith counsels radio and television groups, wireless telecommunications companies, cable program services, and banks and investment companies that lend to or invest in telecommunications companies. In addition to advising clients on day-to-day regulatory matters, he assists them in structuring acquisitions and investments in compliance with complex FCC ownership and attribution regulations, often working with other law firms and in-house counsel. Erin E. Kim is a member of Lerman Senter PLLC specializing in assisting broadcast and mass media clients with transactional and regulatory matters. Her clients include large, publicly traded mass media companies and small local broadcasters. She has substantial experience handling all aspects of complex broadcast transactions.
For an overview of considerations relevant to M&A transactions in the media industry, see
> MEDIA M&A TRANSACTIONS
RESEARCH PATH: Corporate and M&A > M&A by Industry > Media & Telecom M&A > Practice Notes
For a discussion of due diligence factors to consider in a telecom M&A deal, see
> TELECOM M&A TRANSACTIONS
RESEARCH PATH: Corporate and M&A > M&A by Industry > Media and Telecom M&A > Practice Notes
To learn about the consequences of terminating an M&A deal, see
> CONSEQUENCES OF TERMINATION IN M&A DEALS
RESEARCH PATH: Corporate and M&A > M&A Provisions > Termination > Practice Notes
For a discussion on drafting break-up fee provisions in an M&A agreement, see
> BREAK-UP FEE PROVISIONS
RESEARCH PATH: Corporate and M&A > M&A Provisions > Break-up Fee/ Termination Fee > Practice Notes