Open the filing cabinet marked “mergers and acquisitions”, go straight to the fat folder labelled “cautionary tales” and eventually you will reach the strange case of Seagram’s (sub-category: family business disasters).
In the mid-1990s, Seagram’s was a thriving Canadian spirits giant controlled by the Bronfman family, the chief executive reins having recently passed to third-generation Edgar Bronfman jnr. An erstwhile film producer and songwriter, Bronfman had a fateful preference for studios over distilleries.
"Seagram heads for Hollywood," was the New York Times headline when the whisky and gin purveyors acquired a majority stake in MCA, then owner of Universal Pictures, Universal's television unit, theme parks and record labels. Seagram's, which later added music labels Polygram and Deutsche Grammophon to its collection, had "no experience in running an entertainment company", the NYT presciently noted. Well, how hard can it be?
What it was actually heading for, via Hollywood, was an implosion. After five years of bad decisions, the old family business was defunct, its drinks brands carved up between its rivals, its media assets ending up with French group Vivendi.
No crazy leftfield M&A approaches have prompted quite the same type of “huh?” reaction in 2018. Indeed, it was as I was discussing US telecoms group Comcast’s acquisition of Sky that the person I was talking to (not from Sky) contrasted its relative normality with the one-time headspin of Seagram’s drunken forays.
Sky’s Comcast era
Cable company Comcast, wire-installing utility by origin, is not alien to broadcasting. It already owns NBC Universal, the entity created by the 2004 merger of US television network NBC and the non-music Universal assets Vivendi had picked up from Seagram's.
Comcast wrestled hard with longer-term suitor 20th Century Fox to win the prize of Sky: it must have some idea what it wants to do with the pay-TV company and broadcaster, which has 23 million paying customers across Europe. But Sky's current attractions do not guarantee that the marriage with Comcast will be a triumph. Not every merger is the sum of its parts, and some are easily undone by bad timing.
All that can be said for sure now is that the deal, completed in October, produced a nice gain for Sky shareholders. Comcast ended up paying a hefty £30 billion (€33 billion). A slowdown in the European economy and/or unfavourably gung-ho moves by competitors, both new and old, could make it seem like too high a price before the decade is out.
Inside that file of cautionary M&A tales sits the case study of another media group that has been in the news for all the wrong reasons this year: Johnston Press (sub-category: irrational exuberance).
Edinburgh-headquartered Johnston Press whimpered into its collapse in November when it went into administration and was taken over by its bondholders, led by New York hedge fund GoldenTree Asset Management.
Salvage operation
What happens next to Johnston Press is unlikely to be golden. The once-proud regional newspaper group, unable to refinance debts amassed from its boom-time spending spree –which included a staggering price tag of €138.6 million for the Leinster Leader group in 2005 – has become the subject of a grim salvage operation. Creditors will lose out, and they’re unlikely to be the only ones.
Today, it is hard to find exuberance of any ilk in the news media industry, where survival through consolidation has replaced empire-building as the dominant theme. Recent acquisitions of newspaper groups by rival publishers read like defensive plays for scale – part of the means by which the industry might stand a chance of riding out the competitive distortion of Google and Facebook.
In Australia, the man who turned out to be the last chief executive of newspaper publisher Fairfax, Greg Hywood, gave this take in July as he announced that television network Nine was acquiring a controlling stake: "Fairfax has gone from being at the mercy of the non-stop global media revolution to being best of its breed. And that is why Nine wants to merge their business with ours."
Brightside thinking
The last part of this statement is beautiful brightside thinking: Nine hasn’t merged with Fairfax, it has taken it over. As of this week, the 177-year-old Fairfax name has been consigned to history – the line about “being at the mercy of the non-stop global media revolution” is about as apposite as it gets.
Where does this non-stop global revolution go next? The obvious answer is that the convergence of telecoms and media hasn’t finished. Social media companies, meanwhile, increasingly behave like traditional media ones – they might as well start buying up a few.
And folly though Edgar Bronfman jnr’s intoxication with showbusiness was, it’s hard not to wish now for a Seagram-esque, out-of-nowhere vanity purchase or two – dressed up as strategic genius, of course – to keep things interesting.
