ME TAS 2015 Overview

Media & Entertainment Transaction Advisory Services

Global Media & Entertainment Transaction Advisory Services

EY Transaction Advisory Media & Entertainment Leaders

Name Title Country Telephone Email

Thomas J. Connolly Global Media & Entertainment Transaction

Advisory Services Leader

United States +1 212 773 7146 [email protected]

Carolyn Barr Executive Director, Transaction Support United States +1 212 773 3562 [email protected]

Dan Buchler Partner, Transaction Support United States +1 213 977 7654 [email protected]

Karl Cheng Partner, Strategy United States +1 6174786372 [email protected]

Fabio Guerra Pires Partner, Transaction Support Brazil + 55 11 3055 0129 [email protected]

William Fisher Partner, Transaction Support United Kingdom +44 207 951 0432 [email protected]

Atul Mehta Partner, Transaction Support India +91 22 6192 0210 [email protected]

Javier Rovira Senior Manager, Lead Advisory Argentina +54 11 4875 4716 [email protected]

Ajay Shah Partner, Lead Advisory India +91 22 6192 0640 [email protected]

Paul F. Sheahen Partner, Transaction Tax United States +1 212 773 5578 [email protected]

Dorian S. Swerdlow Principal, Operational Transaction Services United States +1 212 773 6179 [email protected]

Alan Wallis Executive Director, Valuation & Business Modeling United Kingdom +44 207 951 3742 [email protected]

Stefan Wojcickyj Executive Director, Valuation & Business Modeling United States +1 212 773 3733 [email protected]

Bryan Zekulich Partner, Transaction Support Australia +61 2 9248 5833 [email protected]

Ben Kwan Greater China Leader China/Hong Kong +852 2849 9223 [email protected]

Name Title Country Telephone Email

John Nendick Global Media & Entertainment Sector Leader United States +1 213 977 3188 [email protected]

Howard Bass Global Media & Entertainment Advisory Leader United States +1 212 773 4841 [email protected]

Ian Eddleston Global Media & Entertainment Assurance Leader United States +1 213 977 3304 [email protected]

Alan Luchs Global Media & Entertainment Tax Leader United States +1 212 773 4380 [email protected]

Global Media & Entertainment Leaders


EY’s M&E Transaction practice is addressing challenges with a dedicated and integrated global team

EY’s globally dedicated M&E TAS practice has 400 professionals meeting clients' needs across:

Acquisitions Market analysis Divestitures Strategic planning

Valuation and modelling Working capital Integration Real estate

Americas

122 M&E Transaction practitioners

EMEIA

234 M&E Transaction practitioners Asia-Pac,

Australia, Japan

36 M&E Transaction practitioners

A global team that leverages our

extensive firm-wide skills in tax,

assurance, process improvement,

risk management, human capital,

and lead advisory


As executives and owners focus on the future they are asking…

Raising

Are we effectively monitoring market conditions to exploit

opportunities to refinance debt or raise equity?

Are our funding sources optimized to build resilience and

maximize optionality?

Do we want to divest any non-core assets

and are we prepared to optimize value

and timing?

Investing

Have we increased the speed and quality of decision

making in our investment appraisals?

Are we maximizing value creation by aligning

management incentives, integration planning and

addressing other post-deal SPA concerns?

How do we manage the risks and rewards of

investing in emerging markets?

Preserving

Do we have the optimal capital structure

to meet our medium-term strategic priorities?

Are we effectively managing our cash across

the enterprise, and do we understand our future

cash needs?

Are we effectively monitoring and controlling risk across our

critical value chains and with our customers?

Optimizing

How is our capital being deployed across

geographies and business units to ensure the

right strategic presence in key markets?

Are any of our assets under-used or under-performing?

Are there opportunities for us to reduce costs, increase

efficiencies, reduce risk, and improve transparencies by

optimizing our tax and legal entity structure?


…and EY’s Transaction practice advises and helps pursue a course of capital agenda actions

Fundraising (equity and debt) – IPO readiness, rights

issues, PE, private placement and capital markets

Optimizing funding structures

Asset divestment

Tax-free spins and carve outs

Cost- and tax-efficient structures

Acquisitions and alliances

Planning and structuring transactions to

optimize stakeholder return

Focused due diligence to mitigate risk

and drive value

Asset valuations

Cost- and tax-efficient structures

Stress and distress – e.g., liquidity

issues and turnaround plans

Customer and supplier analysis

Preserving tax assets and minimizing costs

Refinancing or restructuring debt, equity

and other obligations

Dealing with stakeholder relationships

and pressure

Dispute resolution

Optimizing asset portfolio

Realize synergies and effective

integration

Improving working capital and

releasing cash

Optimizing capital structure

Optimizing tax and corporate structure

Supply and distribution chain

optimization


Client success stories


Multi-billion dollar global MVPD transaction required pre-deal diligence and accounting harmonization

A large global MVPD was acquiring a leading UK telecommunications company in a

multi-billion dollar acquisition. The acquiring company needed to complete diligence and

understand the impact of financial consolidation in a very short timeframe.

Evaluated the underlying performance of the target’s business, including adjusting its operating cash flow and free cash flow to the acquirer’s definitions

Quantified accounting policy differences between the two businesses

Analyzed the complex debt structures of the target along with publicly-available information and target company data to show the debt and debt-like position of the target’s business

Analyze the current trading and outturn of the target

The global EY team combined a skilled due diligence team and sector experience with

US GAAP and SPA specialists to address key financial issues for the acquirer. EY’s work

provided the deal team with comfort, and the necessary diligence over the key issues

impacting the purchase price. All of this work was completed according to the acquirer’s

tight time schedule.

The challenge

What we did

Result

Evaluated the target’s historical and projected financial performance and identified accounting policy differences to support transaction negotiation and consolidated impact


Acquisition of a world famous film production company required buy-side due diligence and deal structuring

The studio arm of a leading M&E conglomerate wanted to acquire a film production

company. The target company had several business lines with complex licensing

arrangements. Certain historical factors, as well as the purchase agreement structure,

elevated the deal’s risk profile. The acquirer wanted to get a fuller understanding of the

activities of the target’s various business units. Finally, because both companies are

well-recognized brands, there was heightened scrutiny by the board, the media

and shareholders.

Performed buy-side due diligence on the target company, and pre-acquisition purchase accounting analysis

Analyzed key accounting areas and operating results for each of the target’s business lines

Analyzed separation considerations and tax implications with respect to businesses/assets not included in the transaction

EY’s work gave the buyer greater confidence in completing the deal. The EY team

ensured that the target’s accounting was accurate and consistent with the acquirer’s. EY

gave the acquirer greater understanding of the profitability of the target’s business units,

helping it assess the implications of its post-close business model for the target.

The challenge

What we did

Result

Provided greater visibility into target’s business, reducing deal risk

EY Media & Entertainment Advisory Services for content and information services companies

EY leads integration and divestiture activities of industry-changing merger

Integration and Divest (PMO) and work stream support for the Business Services segments of two large cable companies

The challenge

This large cable MSO attempted to acquire one of its peers. Both companies are seeing rapid

growth in their Business Services segment (telephony and broadband to the SMB market).

The acquirer saw the integration of the two companies’ operations as a catalyst to begin the

process of building a combined support organization for Business Services. The company was

seeking to choose the “best of breed” of the two companies systems, processes and

technologies. Adding to these challenges was the fact that the client, the target and a third

MSO planned to swap additional assets and to accomplish a tax-free spin-off of a separate

MSO business comprising 3 million customers into a new company (Spinco).

What we did

EY supported the company’s PMO for both the Integration and Divestiture activities:

Coordinated overall development efforts, prioritized projects and work through resourcing/conflict resolutions .

Responsible for technical management and analysis of large data sets moving in/out of the company. This included territory information, subscribers analysis, market research & financial information. Was the “go to” expert on the location, status & accessibility of this info.

Supported Work stream leads in development & tracking of business cases/cost models of each work stream.

Led analysis of revenue and cost synergies (& dis-synergies) resulting from the transaction. Was the subject matter resource on financial impacts of changing operating models, staffing levels, consolidation, etc.

Result

In the PMO function, EY helped the companies move toward successfully integrating

and divesting all components of the transaction, prepare to hit the established

revenue and cost synergy targets and to mine through multiple data elements.


EY leverages global network to find a strategic buyer

This leading Indian multi channel network (MCN) on Youtube had profitable operations.

The MCN space was very attractive to private equity investors globally. However,

because of a passive investor owning significant majority, it was difficult to do a PE

transaction. Given that there were no large strategic players in the space in India and

given the size of the asset, cross border strategic deal was a challenge. EY was

mandated to provide an exit to the existing investor and also raise additional capital for

growth.

EY used its global network and relationships to identify a list of synergistic strategic players.

EY conducted a roadshow of the company with investors in US and Canada and shortlisted an investor for a exclusive process.

Acquirer’s parent entity was a multi billion dollar media conglomerate and EY played an important role in convincing the parent of the niche value proposition of the company in global MCN space.

EY’s work gave the acquirer greater confidence in completing the deal. The EY team

ensured that the acquisition of the target was showcased as the perfect fit for the long

term vision of the buyer. EY also gave the acquirer greater understanding of the

profitability of the target and its operating metrics which convinced them of the stability

and growth potential of the target going forward.

The challenge

What we did

Result

Showcased long-term growth prospects of target to ensure its sale


Investment in mobile game company required buy-side tax and financial due diligence

A Chinese media conglomerate wanted to take an equity stake in a US-based

mobile gaming company. As this was one of the company’s first investments in

the US, it was unfamiliar with many of the processes involved. Also, the target

company had grown rapidly in recent years, but having been in operations for a

only few years, there was little in the way of historical financials to analyze.

The EY team provided financial and tax due diligence.

EY analyzed the potential tax implications of the investment.

EY performed traditional financial due diligence on the target’s recent financials. However, as the company (and industry) is relatively new, the EY team also analyzed the assumptions and operating metrics that comprised the target’s forecast model. The team examined the target’s users’ behavior and content pipeline to ensure that current growth rates would be sustainable over the longer term.

EY’s work gave the buyer greater confidence in making the investment. The EY

team helped the investor understand the target’s business better gain greater

comfort in the target’s forecasts and identify deal risks.

The challenge

What we did

Result

Provided greater confidence in the target’s industry and financial forecasts


Divestiture required understanding the entity’s quality of earnings and potential market positioning

Prepared pro forma standalone financial statements for the entity to determine its quality of earnings.

Analyzed the operational organization, identified the points of entanglement with the parent and supported the development of a cost structure on a standalone basis.

Provided insights with from EY’s Parthenon group to assess the market positioning of the business in a potential sale process.

EY’s work provided a view of the entity on a standalone basis that significantly contrasted

with the parent’s view. As a result of our findings, the board decided to halt the sale

process and focus on internal reorganization and areas of improvement we identified

during the engagement.

The challenge

What we did

Result

Provided greater visibility into the potential divestment process

A multi-billion dollar global company in the education sector was considering the sale of

an entity—the sale of which would reshape the company’s organization and market

focus. A series of restructuring activities meant that the entity was highly dependent on its

parent for a variety of support functions, obscuring its true cost structure. As a result, the

company had limited visibility into the potential financial performance of the entity as a

standalone business. Additionally, the management team had limited experience in

transformational and complex divestments.

Global content deal required financial due diligence and tax structuring

Provided financial due diligence and tax structuring

The challenge

An Australian pay TV service and global television network teamed up to buy a free-to-air TV station in Australia. The deal creates a number of content and advertising synergies.

What we did

We were asked by the JV partners to perform financial and tax due diligence:

EY performed financial due diligence on the target. This included understanding the target’s declining historical trading and challenging the forecast turnaround assumptions.

EY provided tax structuring to ensure that the deal was structured in the most tax-efficient manner.

EY reviewed the synergy model of one of the venture partners to better understand the target’s key metrics and likely synergies from the deal.

Result

EY provided a thorough review of the target’s forecast assumptions and identified a number of risk areas which were used by the client to build and support their valuation model. EY also provided to the client support to react quickly and efficiently to the deal structuring put forth by the target.


Recognition in the market


We’re recognized as a market leader by analysts and industry professionals

Leading TAS advisor

Recognition

#1 brand for Transaction Advisory Services in India TNS Global Brand Survey 2013

Most Active Transaction Advisor Award

2014, 2013, 2012, 2011, 2010 and 2009 by

Venture Intelligence

Accountancy Firm of the Year and Financial Adviser of

the Year Central & Eastern Europe of 2014

Market leader

2014: Global M&E client work

covers more than 50% of

worldwide deal market.

Leading Infrastructure Advisor EY leads Project Finance International’s

league table


Timely and relevant insights


Thought leadership

Spotlight on China

Every global strategy

needs to include

China. Although the

challenges for M&E

companies seeking to

enter or expand their

market presence

remain significant, four

key factors can help

M&E companies

succeed.

M&E Global Capital

Confidence

Barometer

The study highlights

the results of a survey

of M&E executives on

their views of the

global economy, the

capital markets and the

transaction

environment.

The timely and topical pieces below are designed to help clients understand the big industry issues, and how those issues can impact their capital agenda. We provide valuable insights that will help you raise, invest, optimize, and preserve

The Future of TV

We have identified six

major trends that we

think help tell the story

about the future of

television and what it

means for media and

entertainment

companies. We also

discuss how they can

prepare for a world

where consumers are

in control.

2014 CFO Study –

It’s Showtime!

Digital drives the

agenda, data

delivers the insights

Interviews conducted

with 50 leading CFOs,

representing

companies with

combined revenue of

over US$475 billion,

who provide a global,

multi-sector

perspective.

Sustaining digital

leadership

Offers insights on digital

growth strategies,

business models and

methods of customer

engagement that

companies are

executing to pursue and

sustain M&E sector

leadership.

Riding the new

wave – Are you

ready for accelerated

digital media

adoption?

This report helps

answer four questions

for M&E executives

considering digital

growth in international

markets related to:

market potential; risks

and costs associated

with entry; timing of

entry; and capital

allocation.


Want to learn more?

www.ey.com/mediaentertainment

Mobile app: eyinsights EY Global Media & Entertainment

on Twitter, @EY_MandE

Follow us on Twitter

Ernst & Young LLP

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and advisory

services. The insights and quality services we deliver help build trust and

confidence in the capital markets and in economies the world over. We

develop outstanding leaders who team to deliver on our promises to all

of our stakeholders. In so doing, we play a critical role in building a better

working world for our people, for our clients and for our communities.

EY refers to the global organization and may refer to one or more of the

member firms of Ernst & Young Global Limited, each of which is a

separate legal entity. Ernst & Young Global Limited, a UK company

limited by guarantee, does not provide services to clients. For more

information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the

global EY organization that also does not provide any services to clients.

How EY’s Global Media & Entertainment Center can help

your business

In an industry synonymous with creativity and innovation, the bar for

business excellence is set high. You need to embrace new technology,

develop new distribution models and satisfy the demands of a voracious

and outspoken consumer. At the same time it’s important to manage

costs, exceed stakeholder expectations and comply with new

regulations. There’s always another challenge just around the corner.

EY’s Global Media & Entertainment Center can help. We bring together

a high-performance, worldwide team of media and entertainment

professionals with deep technical experience in providing assurance, tax,

transaction and advisory services to the industry’s leaders. Our network

of professionals collaborate and share knowledge around the world, to

provide exceptional client service and leverage our leading market share

position to provide you with actionable information, quickly and reliably.

© 2015 EYGM Limited.

All Rights Reserved.

1502-1410034

ED 0115

This material has been prepared for general informational purposes only

and is not intended to be relied upon as accounting, tax, or other

professional advice. Please refer to your advisors for specific advice.

www.ey.com

ME TAS 2015 Overview

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