M&A and SPACs—how the media sector finally secures funds

The last 12 months have brought significant changes to the financial markets, with the rise of retail investors, the SPAC (special purpose acquisition company) boom, and the merger and acquisitions flow. Those trends have also reached the media industry. 

As an introduction, a special purpose acquisition company, also known as a blank-check company, is a publicly traded firm with no assets that raises capital with the intention to eventually acquire an existing private company. The past 12 months have seen a boom of SPAC deals, as it is more appealing for investors to launch a SPAC, raise funds and then purchase a private company, turning it into a public one, than to go through an initial public offering (IPO) process. Money has been available this year, and investors need somewhere to put it. 

The SPAC boom has reached the media sector, with multiple companies planning to go public through this mechanism. For instance, Forbes has already agreed to go public through a special purpose acquisition company called Magnum Opus Acquisition Limited in a deal valued at $630 million. Vox Media, which owns Vox, New York Magazine, and Vulture, is considering going public by a merger with a SPAC as well. Vice Media also was expected to be publicly traded once it merged with a different SPAC, but the deal was called off. Vice has since raised $85 million from its existing investors. Digital media company BDG Media, which owns Bustle and Input, is also understood to be pursuing a similar deal. But the most notorious deal is Buzzfeed’s. The outlet was preparing a SPAC deal but has run into problems with its biggest investor, NBC Universal. The NBC execs believed they would get less than what they had already invested. It is obvious that the multiple deals in the works are part of the financial backdrop of the SPAC boom, low-interest rates and changing stock values. But they also signal that SPACs are giving the media industry a financial lifeline with new investors willing to put money in. 

But some deals have been quite traditional. For instance, the latest move of German publisher Axel Springer took place this August when it acquired digital outlet Politico. Springer traditionally owned German outlets, such as the newspaper and TV station Welt and the daily Bild. But in the mid-2010s, the firm’s CEO, Mathias Döpfner, decided to take another approach to guide the company—he would turn Springer into a global empire. How? By purchasing digital outlets. First, the firm secured a partnership with Politico to create Politico Europe, which both firms would own. Then, in 2015, Springer tried to take over the Financial Times and the Daily Telegraph but lost on both counts. The company turned to buy stakes in other outlets such as Business Insider that same year and Morning Brew in 2020. This summer, the firm made its latest purchase buying digital outlet Politico and explored pursuing Axios but later decided not to pursue it further. 

The moves point at Springer’s strategy—“Our ambition is to become the leading digital publisher in the democratic world,” as its CEO put it when the Politico deal closed. Springer’s growth is geared towards survival, not just dominance. The company aims to become an industry leader with diversified income and an established audience. Becoming big enough and controlling the market will ensure Springer’s stability. But, once a growth pattern is established, the firm needs to keep growing or perish. If this is the case, we will see new purchases soon.

Springer is not the only company looking at M&A deals. Buzzfeed bought HuffPost and Vox has recently purchased the podcast outlet Hot Pod. Consolidation has been a trend in the media industry in the past five years. Digital media outlets that depend on advertising saw their revenues and traffic drop with changes in social media’s algorithms. Local newspapers struggled to make ends meet with reduced audiences that went to national dailies for their news. The solution was to merge and consolidate, reduce costs, and move towards subscription models. But some outlets, such as the New York Times or the Washington Post, already dominated subscriptions. The result? Fewer companies in the media sector.

Both trends, M&As and SPACs, will move the media sector towards a more consolidated industry. There will be fewer but financially healthier companies dominating the market. Some outlets will disappear, many will merge and most of them will have to respond to the markets.