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Media valuations ‘too high’ for private equity

Corporate mergers and acquistions have made a comeback over the last year, but not private equity M&A in the media space, because valuations had shot ahead of where they should be, according to Lorne Somerville, partner and hed of TMT, CMC Capital Partners.

“We have to look five years ahead,” said Somerville, speaking at the FT Digital Media conference this morning. “The biggest issue is how to monetise media in all its forms. A lot of the valuations there have got ahead of themselves.”

Somerville said it was difficult to justify new investments in Europe in particular in territories where rates of economic growth are extremely low.

Aryeh Bourkoff, founder and CEO, LionTree, speaking on the same panel said that the shock of 2008 meant there was along process of rebuilding confidence. Using available money to buy back stock and provide dividends to rebuild investor confidence has taken priority, he said.

Bourkoff said there was now an opportunity to diversify into new businesses or into core businesses in new markets. However, investors remained cautious, he said.

Bourkoff said that media companies have been “getting smaller” and have focused on spinning off parts of their business and buying back stock. However, technology companies including Google having been getting bigger. “Media companies have to mindful of a landscape where they will be judged alongside companies that are financially much more powerful than they are,” he said.

Bourkoff said that as these new companies became more comfortable with content, they would invest in it. Intially, he said, digital technology companies have built platforms that would give them an understanding of consumers.