M&A deal value in M&E sector reduced to Rs 6800 crore in 2020: FICCI-EY report
The decline is despite the number of deals increasing from 64 in 2019 to 77 in 2020
This was largely due to the absence of big-ticket deals with only two deals crossing the $100 million threshold as compared to four such deals in 2019. Dream11 raised Rs 1600 crore from Tiger Global Management, TPG, ChrysCapital and Footpath Ventures while Dailyhunt raised Rs 738 crore from Google, Microsoft, Falcon Edge, Sofina, and Lupa Systems.
Digital media and gaming together attracted 92% of the investment in 2020 with COVID-19 induced lockdowns further accelerated the adoption and consumption of these two mediums. The ban on popular Chinese apps across the digital space came as an opportunity for local apps which received investment from PE/VC to scale up and fill the void.
Unlike new media, the deal activity in traditional media was subdued with very few deals including the merger of STX Filmworks with Eros International, PVR’s rights issue and fundraise by Inox via QIP. Traditional media accounted for 8% of the total deal value as compared to 63% of total deal value in 2019.
At the time when theatres were shut across the country because of the pandemic, PVR made a rights issue of Rs 300 crore for approximately 6.93% stake, which was oversubscribed by 2.24 times
Inox raised INR2.5 billion for approximately 8.7% stake through a QIP from marquee global and Indian institutional investors, including Abu Dhabi Investment Authority, Eastspring Investments, and mutual fund houses like ICICI Prudential, Birla Mutual Fund, Nippon India Mutual Fund, DSP Mutual Fund, and Sundaram Mutual Fund
The merger of STX Filmworks with Eros International in an all-stock deal to form Eros STX, a global entertainment content, digital media streaming, and OTT powerhouse
Unlike 2019 where 52% of the total deals were led by strategic players, only 27% of total deals were led by strategic players in 2020. PE / VC firms led 70% of the M&E deals in 2020 contributing to 79% of the total funding received during the year.
Digital content
Regional content platforms saw the highest deal activity in 2020, across both video and text formats.
News and content aggregator Dailyhunt raised Rs 1250 crore in 2020 through multiple rounds of investments to scale up its recently launched short video app Josh and further develop its content creator ecosystem.
In February 2020, Dailyhunt raised Rs 510 crore led by Lupa Systems and Sofina along with existing investors such as Bytedance, FalconEdge, Advent Management, and Goldman Sachs. It further raised Rs 740 crore in November 2020 from Google, Microsoft, Falcon Edge, Sofina, and Lupa Systems.
JetSynthesys Pvt. Ltd. a digital content and technology platform, raised Rs 300 crore in funding led by the family offices of Serum Institute of India chief executive officer Adar Poonawalla and Infosys co-founder Kris Gopalakrishnan. Inshorts raised Rs 260 crore for its location-based social network app Public from Lee Fixel’s Addition, SIG Global, and Tanglin Venture Partners.
Bengaluru-based lifestyle-community-commerce platform Trell raised Rs 85 crore in a Series A round led by KTB Network. Pratilipi, an Indian language storytelling app raised Rs 76 crore from Tencent, Omidyar Network, Shunwei Capital, and Nexus Venture Partners. Bulbul, a video and live stream-led social commerce platform, raised Rs 65 crore from Info Edge Venture Fund, Sequoia, and Leo Capital.
Gaming
Fantasy and esports continued to attract the largest share in the gaming space headlined by Dream11's Rs 1660 crore fundraising from Tiger Global Management, TPG, ChrysCapital, and Footpath Ventures to build an end to end sports tech company.
MPL raised Rs 660 crore in a Series D round led by Composite Capital and Moore Strategic Ventures, with participation from Base Partners, RTP Global, SIG, Go-Ventures, Telstra Ventures, Founders Circle, and Play Ventures. MPL will use the funds to expand its esports portfolio and bolster its efforts to organize more such esports tournaments nationally and internationally at scale.
Winzo, a social gaming platform, raised Rs 130 crore in a Series B round led by Makers Fund and Courtside Ventures to improve its content pipeline and engage mobile-first gamers.
Audio streaming
Reliance Industries bought a further 10.9% stake in Saavn Media for Rs 650 crore from Saavn’s erstwhile promoters. Gaana raised Rs 380 crore from Tencent and Times Internet Limited to compete with rivals such as JioSaavn, Spotify, YouTube Music, and Wynk.
Digital advertisement
Singapore-based Anymind Group acquired Indian mobile video advertising company Pokkt, expanding its offerings, global presence in India and the Middle East, and its leadership team.
Nihilent Ltd, a global consulting and services company, acquired cross-disciplinary advertising platform Hypercollective to help Nihilent leverage its creative capabilities with its stack to be able to provide customers with solutions across the technological and creative spectrums.
Key M&A themes going forward
According to the report, the investments in scalable D2C business models will continue. Further, digital companies with a differentiated product offering and an identified path to monetization/profitability will attract significant interest from both financial and strategic investors.
Companies with a strong balance sheet that have been nimble to adapt to the digital disruption will come out strongly from the pandemic led recession. Such companies will explore selective consolidation opportunities to further gain market share. Companies with strong technological platforms leveraging next-gen tools such as Artificial Intelligence, IoT and advanced analytics will also attract investments.
Traditional advertising agencies and tech giants will both continue to invest in niche MarTech companies to differentiate and compete with larger digital and consulting networks. Companies under financial stress will also look to partner with a larger strategic player to fund and accelerate their growth plans.
