Gambling on M&A in 2025

There is also a real need to drive growth and deepen organisations’ skills and assets: M&A is the quickest way to do both at the same time. Yet this all has major and growing risks.

The growing importance of M&A

M&A used to be thought of as the domain of larger companies but is now seen by many smaller operations as a realistic route to revenue growth and to building the broader capabilities of the business. Yet a number of companies are finding that they can be both potential buyers and sellers at the same time — diners can suddenly flip into dinners and vice versa. A loose partnership can morph into a merger (often messy) or a clean acquisition (more straightforward, but still filled with different challenges). In addition, the whole market is a mix of well-planned strategic deals and quick-fix, opportunistic bolt-ons. The result is a very jerky, stop-start M&A market.

Declining acquisition success rates

Over the longer term, the mediafutures benchmarking programme has picked up on a trend for participants to rate the success of a recent acquisition more negatively than a few years ago, pre-pandemic. This has been due to three key factors: (1) poor due diligence before the deal, (2) deeply rooted cultural and organisational mismatches between the companies, and (3) cack-handed integration of operational processes and tech stacks — a recurring theme. In terms of company size, the largest operations have the strongest success rates and the scores plummet the smaller the company is. The obvious conclusion of that is that the more deals a company completes, the better they get at it.

The reasons why people acquire:

• Consolidation, as companies try to build simple scale or to close down the competition.
• Extending into new markets: both in terms of geography and market sector, although these tend to be overlapping / parallel / complementary to the current operation rather than massive lateral leaps.
• Targeted gap-filling: creating an operational base in a new area of activity and obtaining expertise and skills and tech capability (eg. video studios, data analysis companies, live events companies, ecommerce operations).
• Opportunistic buys & swaps: tactical streamlining of ‘long tails’.
• Refocusing & demerging, as sprawling portfolios are trimmed down and reshaped into more focused, vertical units — narrow, but deep. This is intended to make them more efficient and agile operationally, but also means that they are easier to sell off or to partner in collaborative joint ventures in the future.
• Arm’s length: financial investment in its own right in a completely new area, which may never be integrated into core business.

The reasons why people avoid M&A

Yet, there is a sizeable group of ‘organic growers’, who have rejected the whole M&A route, usually for one of two reasons. Firstly, they simply do not have the resources — in terms of cash, manpower or expertise — to find an appropriate acquisition in the first place and then to follow it through to a successful integration. Secondly, they have a more fundamental belief that the better growth option is organic: a slower path, but more stable, sustainable and controllable in the longer-term. These tend to be family-run or owner / operator companies. In between the two extremes are a growing number of hybrid ‘buy-and-build’ strategies.

What happened to M&A in 2024?

The perception of last year was shaped by a number of big, messy deals, dominated by troubled news businesses. These included the on-off sale of The Telegraph (with the £100m Spectator deal as a wild side-show), National World and The Observer. Over in B2C, there were a number of relatively low-level deals and title-swaps, with ongoing questions about Future’s magazine business looming over everything.

Collingwood tracks smaller deals and in more B2B-focused sectors in its ‘Media Acquisition Report 2024’, yet the trend is indicative of what happened across all markets.

Essentially, deal volumes in the UK and Europe dived in the second-half of 2022, recovered a little and then plateaued in 2023, before accelerating back up in 2024. H1 2024 deal volumes were +35% up year-on-year and stood at 85% of H1 2022.

What is likely to happen in 2025?

There are a number of trends that both mediafutures and Collingwood are picking up:

• The economic drivers have been all over the place through 2024, with the cost of borrowing being the single largest factor.
• Deals are taking longer to complete. More risk-averse buyers are doing more thorough due diligence and are constructing more complex performance-related, earn-out deals.
• Valuation multiples have become more wide-ranging by type of business, from ad-dependent B2C businesses at the low end up to subscription data-driven B2B operations at the top end, with a resurgent events sector in the middle.
• Where the money is coming from wobbles from period to period, but in the longer-term is relatively stable, with trade acquisitions accounting for around 50% of deal volumes, private equity funded trade deals for 40% and pure PE plays for 10%.

Sitting behind all this is the destabilising impact of AI, which can either enhance or trash company valuations, depending on what can be very subjective judgment calls. Yet that is the whole story of AI at the moment. Nobody really knows!

The stakes and risks of M&A have never been higher. Badly executed, an acquisition can destroy a business. Yet for the bold, there will be some remarkable and transformative deals, that could change the shape of complete markets. It is going to be an interesting year ahead!

mediafutures is an ongoing benchmarking survey of the industry undertaken by Wessenden Marketing in partnership with InPublishing. Now in its 16th year, it maps the key drivers, metrics and issues that are transforming the shape and direction of the whole media business. mediafuturesPULSE is a new, more regular tracking survey of key industry performance metrics.