Media sector deal review Q3 2015

Media sector deal review Q3 2015 www.trilliumpartners.co.uk

Trillium s view: Recent trade buyer trends When we wrote to you 3 months ago about the Media M&A environment, we focused on private equity s enthusiasm for the sector, evidenced by deals such as Providence s tertiary acquisition of Clarion Events, Inflexion s partnership equity deal with Closer Still that enabled Phoenix/NVM to exit/partially exit very successfully and Lyceum s secondary takeout of Briefing Media, one of the UK s leading events and publishing businesses serving the agricultural sector. This time, we will be taking a look at trade activity in our sector, with a particular emphasis on Q3 2015 With the IPO market somewhat cooled from the highs of early/mid 2014, the banking market (whether traditional or alternative) offering good liquidity and corporate shareholders (whether they be public institutional shareholders or financial sponsors) keen to support growth and consolidation strategies in their underlying investments, trade buyers have once again been highly active on the M&A front, particularly at the larger end of the market. Many of these buyers have undergone radical internal change over the last 3 years to re-position their businesses for the digital age and most are in rude financial health, providing a solid foundation for more expansionist strategies for growth The rationale for M&A is often multi-faceted but we have the following observations about Q3 2015 activity: US interest in Europe US companies have a long history of acquiring in Europe, with the UK often the starting place for a grander advance on continental Europe. Discovery s acquisition of the remaining 49% of Eurosport and Technicolor s purchase of The Mill are further examples of this trend. The former deal consolidated Discovery s position in European subscription cable in a highly prized genre and enabled TF1 to simplify its corporate structure. The latter transaction enabled Technicolor to expand its services to the global film industry and highlighted the expertise that has long existed in the UK to support this sector with talent and other creative services. One only has to look at the continuing success of Pinewood Shepperton to appreciate this more fully Good content is highly valued there are many high quality B2B information assets in the world and their must have content, often supported by high levels of recurring subscription revenues from blue-chip customers, has made them hugely popular with private equity and trade buyers alike. Specialist, and iconic, news information assets are also capable of attracting buyers from around the world, especially if they have a global audience. After years of speculation, therefore, it was no surprise to see Pearson finally sell both The Financial Times and its holding in The Economist in order to concentrate further on its Education strategy. Nikkei paid a full price to get hold of FT, whilst the Agnelli family increased their holding to become a very significant minority shareholder in The Economist, through Exor. News assets they may be but both are unique, highly revered brands that have continued to have relevance in the world notwithstanding the challenges to their business models Sector consolidation if the FT and Economist deals speak more to transformation and globalisation, other deals such as Trinity Mirror s acquisition of Local World and Tele Columbus purchase of pepcom highlight how the distribution of media still remains, with a few notable exceptions (such as Sky Europe), a national pastime. The UK regional newspaper market has been ripe for consolidation for many years but a combination of the digital challenge, political intransigence and complex social/employment issues have all contributed to the glacial pace of change. Local World challenged that norm 3 years ago; Trinity Mirror, a minority investor in Local World having contributed its assets to the venture, have taken full control of the portfolio where further cost rationalisation is anticipated to extend the life of the underlying print assets as digital revenues are grown. German cable consolidation is a little behind that of the UK but inevitable nonetheless, with further M&A activity expected with the blurring of the traditional lines between TV broadcasters, telecoms companies and the newer broadband/cable operators Private equity have been keen buyers and sellers the private equity community has a good track record of knowing when might be a good time to exit. Most underlying media markets are trading at 5-year highs and, therefore, with the IPO market less available to them, there has been a surge in PE exits to trade buyers. Star Capital, Equistone, Phoenix, Veronis Suhler Stevenson, LDC and Carlyle are amongst a host of PE firms to have taken advantage of 2015 s valuation levels to achieve successful exits. At the same time, there has been strong support from private equity for buy-and-build plans, notably Providence backing Clarion Events in a series of deals since it took control at the start of the year and the same firm s take private of Chime Communications to build a sizeable sports marketing services business Trillium has a long track record of advising corporates, whether listed, private or private-equity backed, on mergers, acquisitions, disposals, joint ventures and minority investments, as well as accessing the private equity and debt markets to support acquisition and development strategies. Our sector focus includes Advertising & Marketing Services, Broadcasting & Content, Education & Training and Information & Events. 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Global overview $140bn $120bn $100bn Global Media M&A N America Europe Asia ROW No. of deals $85.2bn $104.8bn 600 500 400 Reported global Media M&A transaction value in Q3/2015 was around $36bn, which represents a 33% increase over Q2/2015 after excluding the Q2 proposed $78bn merger of Charter Communications and Time Warner Cable $80bn $60bn 300 Compared to Q3/2014, the reported global Media M&A transaction value in Q3/2015 rose by 25% $40bn $33.2bn $32.8bn$32.1bn $27.8bn $25.9bn $23.7bn $20.9bn $20bn $9.6bn $10.8bn $10.8bn $8.4bn $28.6bn $20.0bn $26.2bn $35.7bn 200 100 The number of deals announced this quarter (524) decreased by 7% over the last quarter $bn Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 0 Source: Thomson One, Trillium analysis European overview Reported European Media M&A transaction value in Q3/2015 was $5.5bn, an increase of 9% over the previous quarter, although the deal volumes (214) declined by 7% This quarter also included: a number of notable Cable deals, including the acquisition of Cablevision Systems by Altice ($18.1bn); the acquisition of pepcom by Tele Columbus ($689m); and the acquisition of Eurosport by Discovery ($537m) Several significant UK publishing deals, such as the acquisition of the Financial Times by Nikkei ($1.3bn); the acquisition of The Economist by Exor ($447m); the acquisition of Local World by Trinity Mirror ($238m) and the acquisition of various Informa Business Information assets by Progressive Digital Media ($39m) Rank Date Target announced Target name country Media sub-sector Acquiror Acquiror country 1 Sep 15 Cablevision Systems States Cable Altice Netherlands $18,108 m Pending 2 Jul 15 Financial Times Value Status Nikkei Japan $1,309 m Pending 3 Sep 15 pepcom Germany Cable Tele Columbus Germany $689 m Pending 4 Jul 15 Chime Communications 5 Jul 15 Eurosport France Cable 6 Aug 15 The Economist Newspaper Advertising & Marketing Providence and WPP Discovery Communications States $657 m Completed $537 m Completed Exor Italy $447 m Completed Groupe News 7 Jul 15 NextRadioTV France Broadcasting France $429 m Intended Participations 8 Sep 15 The Mill Advertising & Technicolor States $293 m Completed Marketing 9 Sep 15 Local World Trinity Mirror $238 m Pending 10 Jul 15 CTC Media-Russian & Russian Fed Broadcasting UTV Management Russian Fed $200 m Pending Kaz Ops 11 Jul 15 TV3 (Ireland) Ireland-Rep Broadcasting Liberty Global $97 m Completed Television 12 Aug 15 JT Bioscopen Netherlands Audio Visual Vue Entertainment $95 m Completed 13 Sep 15 Envivio States Broadcasting Telefonaktiebolaget Sweden $88 m Pending 14 Jul 15 Turtle Entertainment Germany Broadcasting 15 Jul 15 Collective Digital Studio Modern Times Group MTG Sweden $86 m Completed States Audio Visual ProSiebenSat1 Media Germany $83 m Completed 16 Sep 15 Arion Entertainment Netherlands Investor Group Belgium $55 m Completed 17 Sep 15 Talentum Finland Alma Media Finland $51 m Pending 18 Jul 15 Q3/2015 Top 20 European Media transactions Informa (Business information assets) 19 Jul 15 Cinesa-Cinema,Madrid Spain Audio Visual 20 Sep 15 OpSec Security Group Progressive Digital Media Immobilien Europa Direkt Orca Holdings Switzerland Cayman Islands Source: Thomson One, Trillium analysis. List includes only deals with disclosed transaction values $39 m Completed $28 m Completed $25 m Completed 2

European Media M&A by sub-sector M&A deal volume in Europe was highest in and Advertising & Marketing Services, with both sectors each responsible for around 33% of total deals 40% of total M&A deal value in Europe were in relation to Broadcasting and Cable assets on a combined basis, almost 20% consisted of Advertising & Marketing deals and activity rebounded to comprise nearly 40% of total deal value this quarter $30bn $25bn $20bn $15bn $10bn $5bn $1.8bn $7.2bn $3.5bn $2.5bn European Media M&A by sub-sector $7.8bn $3.8bn $27.9bn $18.1bn $2.4bn $17.7bn $2.0bn $17.1bn $6.5bn $7.0bn Cable Broadcasting Audio Visual Advertising & Marketing No. of deals $11.5bn $5.0bn $5.5bn 300 250 200 150 100 50 $bn Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 0 Source: Thomson One, Trillium analysis European Media M&A by acquiror type $30bn $25bn European Media M&A M&A by by acquirer acquiror type type $27.9bn Trade (volume) PE (volume) Trade (# of deals) PE (# of deals) 300 250 The community of trade buyers remains very active across a range of Media sub-sectors with M&A being driven by European acquisitions by US firms, high-value content plays, sector consolidation and a rising number of PE exits $20bn $15bn $10bn $5bn $1.8bn $7.2bn $3.5bn $2.5bn $7.4bn $3.8bn $18.1bn $17.7bn $17.1bn $11.5bn $6.5bn $7.0bn $5.0bn $5.5bn $2.4bn $2.0bn 200 150 100 50 The deal value (where disclosed) of total European Media transactions for the first three quarters of 2015 is almost 14% lower than the comparable period in 2014, but overall deal volumes have increased by almost 10% $bn Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 0 Source: Thomson One, Trillium analysis. Note: M&A volume figures only include transactions with publicly disclosed values. 3

EV/EBITDA Trading multiples EV/EBITDA (1 year forward) Trading multiples European Media sub-sectors Broadcast (Radio) 14.0x B2B Information Advertising & Marketing Average Broadcast (TV) 12.0x (Consumer) 10.0x 8.0x 6.0x 4.0x 2.0x Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Source: Thomson One, Trillium analysis. Data as of 30 th September, 2015 The average forward EV/EBITDA multiple of our selected Media sub-sectors is 9.8x The B2B Information (11.0x), Advertising and Marketing (10.4x) and Broadcast (TV) (10.0x) sub-sectors currently trade at a premium to the sector average Notes re trading multiples: Enterprise Value (EV) defined as: Market Cap. + Net Debt (non-current liabilities + current liabilities excluding trade payables cash) + Minority Interest + Preferred Stock Average multiples comprise the companies as follows: Broadcast (Radio): NRJ Group, UTV Media; Broadcast (TV): BSkyB, ITV, STV, Telenet Group; Advertising & Marketing: Havas, Huntsworth, M&C Saatchi, Next Fifteen, Publicis, WPP; (B2B): Centaur Media, Euromoney, Informa, Reed Elsevier, Tarsus, UBM, Wilmington; (Consumer): Daily Mail & General Trust, Future, Independent News & Media, Lagardere, Pearson, Schibsted, St Ives, Trinity Mirror 4

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