Market Watch: China’s Acquisitions in Cultural Industries Exceed 100 billion yuan in 2014 The total values of acquisition deals in Chinese cultural industries exceeded 100 billion yuan in 2014. It signifies acquisition deals in the industries continue to grow in the year after a strong surge last year. 1. Overall Scale Continues to Increase As of December 20, 2014, there are 159 acquisition deals which are worth more than 100 billion yuan. In 2013, there were only 96 acquisition deals amounting to 50 billion yuan. To give you more information, the value of acquisition deals in the first half had already surpassed that of whole year of 2013. Besides, the scopes of acquisitions expanded in 2014. From mainly gaming and animation, film and TV production and the Internet in 2013, the acquisition deals also took place in education and training as well as travelling and outdoors this year. In 2014, there are 55 acquisition deals in the above five main areas totaling 45 billion yuan, which accounts for 45 percent of the total value of all acquisition deals in the year. 2. Film and Drama Production Remains Most Attractive to Big Investment 1) Film and Drama Production firms have become the life-savers for most companies, no matter if they are listed companies that are facing a decline in profit or traditional companies that are seeking to transform. Many wish to bring new energy into their companies by bringing in profit-earning film and drama production firms. The M&A with such companies do trigger the raising share prices of some companies in the year. 2) Gaming and Animation Remains Hotpot for Cross-Industry M&A Among all cultural industries, gaming is the area for earliest marketization. It is also the industry with most comprehensive operation system at the moment. Putting entertainment at first, the gaming industry attracts massive users in China. This industry will allow buyers to attract high returns in a short period of time. 3) Big Investment Keeps Coming In In 2014, the number of acquisition deals that are worth over 1 billion yuan is 28. The total amount reached 68 billion yuan, accounting for 67 percent of the total value of all deals. They mainly come from two areas, such as film and drama production and gaming and animation. 4) More possibilities in Content Production and Sales and Distribution Channel Firms Key of success of the cultural industries lies in content and creativity. However, as Internet companies grow, they have subverted the development of content production firms by bringing in more new content forms. For example, we have our Chinese animation film “One hundred thousand bad jokes” (十万个冷笑话). 5) New form of Media Firms Become Future Direction At the moment, most of the companies in the cultural industries are small-and-medium-sized firms. They can only upgrade their capability thru industry consolidation in hope of breeding large-scaled global companies. You can find examples of Huayi Brothers Media Corp., Zhejiang Huace Film & TV Co., Ltd. and Bestv New Media Co.,Ltd. 3. Uniqueness: Using Cultural Industries as Base for Content Industries Points to note in the heated M&A battles 1) Success comes from what cannot be replicated. 2) Warning against capital speculation 4. M&A is Only Beginning, Consolidation is the Key Being able to attract big investment has a positive effect on lifting productivity and efficiency of the cultural industries. However, this could pose unfair treatment on the ones who are acquired. This may not be good for the industries’ future development. It may also bring about adverse effect. Practitioners need to learn how to run such business with a calmed heart because they take time as well as suitable external operation environment. Besides, China is still suffering from rampant piracy issue at the moment. The country needs to boost copyright protection before she can motivate the proactive development of the cultural industries. Along with the rapid development of the Internet, Chinese companies also need to work with the development as well as to generate new content forms because of it. 5. M&A to Become A Norm In a nutshell, cultural industries will become a new form of economic growth. To practitioners, China’s economic value relies on her cultural value. The development of new cultural products relies on creators’ instinct and creativity, which can be both dangerous and adventurous. Undoubtedly, under the favourable policies and increased market consumption, companies’ M&A will become a norm. Even though companies have stronger assets, but they still have to strengthen themselves for optimal upgrade. (Source: China Economic Net plus LeVP)
Posted on: Fri, 02 Jan 2015 02:47:44 +0000
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