Don’t Let the Sun Valley M&A Mirage Delude You
The world’s biggest media and tech heavyweights will be descending on Sun Valley, Idaho this week for the annual Allen & Co. conference. As is the case every year, speculation about dealmaking will be intense among observers with their noses pressed against the tinted glass, trying to sneak a peek inside the caravan of Uber Luxes depositing their mogul passengers, who typically offer nothing but a smile and a wave to onlookers.
Historically, some of the biggest M&A deals began as simple conversations between execs at Sun Valley. Most recently post-pandemic, we saw the WarnerMedia-Discovery and Amazon-MGM deals shake out at the annual retreat.
But don’t be fooled by the M&A mirage: The heat of Sun Valley in 2023 will make you think these deals are just down the road, when they’re not. The current macroenvironment isn’t conducive to M&A, and economic and market uncertainty has been dampening the appetite for dealmaking.
According to S&P Global Market Intelligence, global M&A in Q1 was 23% lower than the same period a year earlier. The total value and number of global M&A deals announced in Q1 were both lower than any quarter in 2022. Execs have been in a wait-and-see mode as interest rates continue to ratchet higher and overall financial conditions remain tight.
On top of that, the poor first half meant big losses for the investment bankers who advise dealmaking. According to Dealogic, investment bankers suffered a 37% drop in worldwide revenue from advising on M&A transactions in the first half of this year, which was one of the biggest drops on record.
At the end of 2022, many were optimistic that we could see dealmaking return to more historical levels by mid-2023. However, a lot has happened in half a year, including two massive bank failures. Even as the economy sends mixed signals, many are still anticipating a larger economic downturn, and it wouldn’t exactly be smart to engage in a massive M&A deal if that were to happen.
Even if no major deals are solidified at Sun Valley this year, there certainly could be some backdoor chats and important seeds planted. With Paramount Global non-executive chair Shari Redstone likely in attendance, it will be interesting to see who she interacts with as her company remains top of mind as an M&A candidate.
Previously, Redstone and Comcast CEO Brian Roberts held a meeting at Sun Valley, which had the media in a frenzy. It’s likely there will be additional chatter if the two sides are caught canoodling again this year.
Then there’s the tough regulatory roadblocks for M&A. Both the Biden administration and Federal Trade Commission chair Lina Khan have been taking a hammer to mega-deals. One example is the still pending Microsoft-Activision Blizzard deal. Khan has her sights set on making sure the deal doesn’t happen before its July 18 deadline. The FTC most recently requested a temporary restraining order and preliminary injunction from a federal court in an attempt to block the merger.
Both Microsoft CEO Satya Nadella and Activision CEO Bobby Kotick are expected to be attending this year’s event. As the deal looks like it could be in jeopardy, perhaps Nadella and Kotick take this opportunity to further strategize the deal and their path forward.
SEE ALSO: Content Czars Face Bummer Summer in Sun Valley
From a regulatory standpoint, it doesn’t appear like any major M&A deals are going to get through this current White House administration. Biden has not been shy about shooting down deals—just look at the blocked Random House-Simon & Schuster deal. With Biden looking for another term, the fate of M&A could very well be at the mercy the next administration.
Finally, the biggest new Sun Valley attendee this year is OpenAI’s Sam Altman. Generative AI absolutely swept the world this year, and Big Tech and media giants have been eager to jump on the bandwagon. Sun Valley could be a prime location for both media and tech companies to discuss their future AI plays and maybe even forge partnerships with AI companies.
Deal or no deal, Sun Valley plays an integral role in fostering relationships among the biggest in the media, tech, finance and sports biz. But with so much uncertainty still plaguing the various industries, much of this year’s event will likely result in much smaller headlines than many anticipate.
