Introduction
We are excited to release the second issue of our monthly newsletter Sector Spotlight
This is a comprehensive newsletter coupled with decks for the current or aspiring investment banker/PE investor, diving deep into the qualitative and quantitative nature of transactions, businesses, and trends across sectors, from the POV of an investment banker/PE investor. The groups are led by incoming investment banking summer analysts & analysts across a range of bulge bracket, elite boutique, and middle market banks.
Unlike other finance newsletters, this will not just simply mention or briefly summarize deals and news but will link to decks that include in depth analysis on a given topic. As this is the first issuance, we’ll be covering three sectors: 1.) Media & Entertainment, 2.) , and 3.) Healthcare. We hope you enjoy this month’s edition and look forward to bringing you monthly updates moving forward. Enjoy!
Best,
Jagger Lambert lambertjagger@gmail.com
James Concepcion jamesconcepcion217@gmail.com
Media & Entertainment
October 2023 Trends: See deck above for a deep dive into these topics and more!
- Legacy media studios have increased streaming prices in a trend towards positioning the DTC segments towards profitability
- As of October 2023, Netflix, Warner Bros. Discovery, Disney, Hulu, and Apple have announced price increases for their streaming services
- Ad-Free Streaming options have increased at a CAGR of 9.14% from 2020-2023
- Coupled with price increases, legacy media studios have been cracking down on password sharing, a trend started by Netflix introducing their paid sharing program
- Disney and Warner Bros. Discovery have publicly announced plays to crack down on password sharing in attempt to tap those users not subscribed
- Netflix posted strong quarterly earnings for Q2’23. Stock gained 16% on the earnings report
- Netflix added 8.76m in Global Streaming Paid Memberships, up 9% YoY from 2.41m
- Nelson Peltz, founder of Trian Fund Management has re-engaged with Disney after ending his original proxy battle in 1H’23. Peltz recently garnered the support of former Marvel Executive Isaac Perlmutter, a former Disney employee and shareholder. Perlmutter has given Peltz control of his Disney stake, allowing Peltz to vote on his behalf as he pushes for multiple board seats
- Streaming platforms have been competing for sports media rights. Cable companies are paying top dollar to hold onto these lucrative sports media rights as Big Tech steps in and bids for these rights. AppleTV is reported to have made a bid of $2bn annually for F1 media rights; doubling the current F1 media rights revenue. AppleTV owns the rights for the MLS. Prime Video owns the rights for Thursday Night Football (TNF). YouTubeTV (owned by Google) owns NFL Sunday Ticket
- Endeavor Group and Fenway Sports Group are exploring the possibility of investing in the PGA Tour, as additional investors (or to replace) the merger with Saudi Arabia’s Public Investment Fund’s LIV. Other private investors are in the running, including KKR
- As of 10/2023, sports betting was made completely legal or legal to a certain extent in 36 states. District of Columbia and many other states are looking to join the legal sports betting industry
- Microsoft x Activision’s $69bn deal closed after a long regulatory battle. Microsoft’s acquisition of Activision Blizzard will significantly enhance Xbox Game Pass by adding a vast library of games
- EA reported a 15% year-over-year growth in bookings for the fiscal fourth quarter, yet its forward P/E ratio is now 11.5% lower at 18.7, which is considered conservative for a leading video game company. EA’s growth is attributed to existing franchises with dedicated player bases: the latest FIFA release, now called EA Sports FC, is the best-selling in the series. FIFA 23’s success is expected to drive a strong launch later this year
- Cloud-based and AI-powered solutions are boosting online gaming uptake and innovation worldwide. Cloud gaming is growing, and AI and deep learning technologies are improving game design and reducing cloud computing platform restrictions
- After two strong years of growth in 2020 and 2021, demand for graphics cards used in personal computers (PCs) has decreased drastically, hurting Nvidia’s (NVDA-0.23%) video gaming industry. The company is doubling down despite the headwinds in this segment
October 2023 Deals:
- AT&T began exploring options for selling its 70% stake in DirectTV given the decline in Cable
- Italian Football club Juventus, which is worth $2 billion dollars and has won 36 Series A championships, is seeking to raise $200 mn. due to its its heavy financial losses
- Southwind Media is exploring a sale of its 80% stake in Mediapro, a Spain-based sports rights and broadcast production group.
- Comcast and Disney have hired investment banks Morgan Stanley and J.P. Morgan to value Comcast’s ⅓ stake in Hulu that will be sold to Disney as part of a 2019 agreement at a minimum valuation of $27.5 bn. See deck above for more detailed breakdown!
- British Billionaire Jim Ratcliffe is nearing a deal to purchase a 25% stake in Manchester United for a $6 billion dollar valuation. This comes after Qatari businessman Sheikh Jassim withdrew his offer to purchase the full club after his similarly valued $6.1 bn offer was rejected by the Glazer family.
- The PGA Tour has begun a formal process to review outside investments in addition or to replace its deal with Saudi Arabia’s PIF owned LIV Golf. Bidders include Endeavor, Fenway Sports Group, and Henry Kravis (KKR).
- Microsoft has completed its $69 bn acquisition of Activision Blizzard after a year long regulation battle ended.
- Saudi Arabia’s PIF backed Professional Fighters is nearing a deal to acquire its rival Bellator.
- Searchlight Capital Partners and British Columbia Investment Management will acquire Consolidated Communications and take it private at $3.1 bn. Valuation including the assumption of debt. Searchlight already owned 34% of the company’s common stock and 100% of the voting stock. Rothschild & Co advised Consolidated Communications, while Goldman Sachs and J.P Morgan acted as the lead advisors to Searchlight. See deck above for more detailed breakdown!
- Dazn Group and Comcast’s Sky Italia won the bidding process for Serie A football league’s TV broadcasting years. They will pay a combined $4.8 bn for the rights for 5 years.
- LAFC (Los Angeles Football Club) is in talks to acquire the Swiss club Zurich.
- Sports, media, & entertainment company Endeavor is reviewing strategic options to be taken private by PE firm Silver Lake.
- Zegona Communications will buy Vodafone Group’s Spanish telecom business in a deal valued at $5.3 bn. including debt.
- Disney agrees to sell the company’s Indian operations to Reliance Industries at a deal valuing the business segment at $10 bn.
- All3Media, a join venture between Warner Bros. Discovery and Liberty Global, is in the final stage for a sale to Peter Chernin’s North Road or Goldman Sachs. The deal is expected to be valued at around $1.2 bn.
