Why we’re doubling down on media deals

As featured in Private Equity News.

Media businesses are primed for private equity backing as the industry evolves. By David Andrews.

Media is one of the UK’s most innovative and exciting sectors. The way we all consume and engage with media content continues to evolve, which combined with a steady flow of new technology, opens the door to significant opportunity for differentiated businesses, and for those with niche market offerings to stand out.

In this constantly evolving landscape, creativity, content and client service are key. Successful media businesses have proven their mettle in recent years and management teams at the helm of an increasingly diverse ecosystem of businesses have shown great resilience, embracing technology and innovation to pursue their ambitions.

Industry change

At LDC, we have a portfolio of media businesses spanning advertising and marketing, film and television, gaming, events and publishing, and communications.

We see a huge opportunity for private equity to support the sector’s growth and we are continuing to invest as appetite and enthusiasm for M&A builds, driven by several major trends.

One of the biggest is the rising value of proprietary data, which is being used to inform algorithms, AI models and support strategic thinking. This can not only enable marketing, advertising and PR agencies to reach audiences in an environment where channel fragmentation is accelerating but also generate actionable insight and inform decision making across industries and functions.

We’re seeing many traditional media businesses diversify into data provision to monetise their assets, and companies with a strong data offering will continue to attract the interest of both private equity investors and trade buyers as it gives them a clearly differentiated competitive advantage which is difficult to replicate.

Precise TV, an AdTech firm in which we recently invested £21m, has a proprietary tech platform which uses AI to analyse millions of online videos, licensed data sources and its own proprietary panel data to build contextualised advertising campaigns for its clients. We are now helping the team to expand into the US, where demand for its services is stronger than ever.

Not all the trends driving investment are digital. Demand for in-person, community engagement is another, perhaps unexpected, factor contributing to investor appetite. The events industry rebounded sharply after the pandemic, and it is now clear this is not a short-term phenomenon. Since many live experiences can’t be replicated by AI or other technology, media and events businesses are finding face-to-face interaction invaluable as part of their strategy to engage with both B2B and consumer audiences.

Star Live, a specialist production agency we backed in 2023 has supported major stadium tours and events including King Charles III’s Coronation Concert, and we are now helping the management team to expand overseas and invest in its people and equipment.

The role of private equity

Alongside investor appetite, demand for private equity backing will increase as the competitive impetus to evolve – whether that’s adopting new technology or entering new markets – intensifies.

Private equity partners can not only provide capital for investment, but support with digital transformation, integrating acquisitions and international expansion. For example, over the course of our five-year investment in Croud, a global full-service digital marketing company, the business completed five acquisitions, invested heavily in its proprietary technology platform, and grew threefold, with its US business now accounting for almost a third of revenue.

All businesses are people businesses, but this is especially true for the creative industries, where successful businesses’ biggest assets are their people. This means that a positive, inclusive culture is critical to seizing new opportunities and growing in a competitive environment, and investors have a role to play to help management teams with retention. This will only become more important as media companies compete with businesses in other sectors for top technology talent.

It is hard to look too far ahead in an industry that is changing so quickly. But what we can say with confidence is that there will be plenty of opportunity for media businesses and private equity to drive the growth of the sector together – and we’re looking forward to partnering with even more ambitious management teams in the years to come.

David Andrews is a Partner at LDC.