Media and entertainment companies are more confident in the global economy than ever before, according to a recent survey by EY.
The report shows 64% of executives believe the state of the global economy is improving compared with 59% one year ago. Executives are more confident in the likelihood of closing deals (33% compared with 23% a year ago), and coupled with a narrowing valuation gap, this is creating momentum to get deals done.
The report is a survey of senior executives from large media and entertainment companies around the world that gauges corporate confidence in the economy, identifies boardroom trends and provides insight into companies' capital agenda.
Respondents' confidence in the availability of credit and financing is at its highest level in five years, which provides a solid platform for deal-making and has resulted in media and entertainment companies significantly increasing their borrowing from the previous year.
Eighty-five percent of respondents believe credit availability is either stable or improving, and 52% of respondents indicate it is improving, compared with 36% one year ago. While, 35% of executives indicated they have debt-to-capital ratios greater than 50%, which is up from 17% the year before, which shows a dramatic increase in borrowing. Perhaps the greatest indicator of the industry's confidence in credit and financing availability is that 51% of executives plan to use debt as their primary source of deal financing during the next year, compared with only 21% one year ago.
"Media and entertainment companies have significantly increased their borrowing the past year, which indicates a combination of greater deal-making activity, paying down debt and returning capital to shareholders," said Tom Connolly, EY's Global Media & Entertainment Transaction Advisory Services Leader.
"This increased availability of credit and growing confidence in key economic indicators shows that more media and entertainment executives plan to pursue acquisitions now more than at any time the past couple of years. However, they need to move quickly with fewer assets on the market, valuation gaps will widen."