The media industry will probably continue in a high state of mergers and acquisitions, said Susquehanna Financial Group. The major reasons being the need to find growth in a declining market, and private-equity firms looking for places to put their money.
The research firm centered on a number of smaller companies in their assertions; specifically Image Entertainment Inc. (DISK), Playboy Enterprises (PLA), New Frontier Media (NOOF), Lionsgate (LGF), ValueVision Media (VVTV), Imax Corp. (IMAX), TiVo Inc. (TIVO), World Wrestling Entertainment (WWE) and 4Kids Entertainment (KDE).
One of the ones that I like is Lionsgate, which actually is trying run itself like a business, in a disciplined manner. Buyers looking for something with solid foundation and predictability, would probably be interested in them.
Image and Imax are proactively seeking buyers as they put together committees for that very purpose. Imax has been struggling for a long time. With the current climate, I'm not sure what anyone could do differently with them unless they changed the entire purpose for the company around, and went another direction.
TiVo is an intersting company, but it's really hard to know whether they really have a sustainable future. A lot of what they do can be easily copied, and the ever-present Internet may have a lot of things to say about their success to come. It seems there are too many things that could go wrong with them, plus the continuing litigation with EchoStar Communications. A big firm may be interested if they fit in with other parts of the company. They do seem to have some upside potential; at least in the short-term.
The 4Kids franchise is run well, but there are also concern about their fundamentals which seem to be breaking down. They do have a connection with Microsoft that may make it appealing to the right people. They do have a lot of cash on hand as well.
WWE is probably the best run company of the bunch. With no debt and a growing base, it's hard to see why the McMahon family would want to sell or merge with someone. They own 70% of the company and could take it private any time they wanted to. Unless they would want to get out of the business, I don't see anything happening with them.
To me, Lionsgate would be the most solid company money could buy here. It will be interesting to see if they attract the interest.
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