In the 1998 film Shakespeare in Love, Geoffrey Rush plays the beleaguered owner of the Globe Theatre, and in one scene he is memorably unable to explain to creditors why his business always seems to be heading toward collapse.
“Let me explain the theatre industry,” he says. “Natural conditions are one of the insurmountable obstacles on the road to imminent disaster.”
Creditors are unreasonable people and ask a reasonable question: “So what should we do?”
“Nothing,” Rush said quickly. “The strange thing is, everything worked out fine.”
That’s what I was thinking as I looked at Crunchbase and Alignment Growth’s mid-year report on the media, entertainment, and gaming industry, which generally seems to always be hurtling toward catastrophe. But the industry, which Crunchbase calls MEG, short for Mergers Sector, is actually on the rise in terms of funding and deals. I was a bit surprised.
The numbers look pretty good, but they’re not foolproof.
For example, according to Crunchbase data, global venture funding for MEG in the first half of 2024 will reach $7.1 billion, up 58% compared to the second half of last year. This is also an increase of about 4% year-over-year. Currently, Disney’s $1.5 billion investment in Fortnite-maker Epic Games is a big contributor to this increase, but there are other green shoots identified by Crunchbase, including a 15% increase in venture MEG activity in Asia compared to the second half of 2023.
Now, let’s look at M&A activity. Globally, M&A activity across MEG is up 100% year over year in dollar terms, and up 2x from the first half of 2023. Many of those, at least in billion-dollar deals, are going private, including Silver Lake’s $25 billion acquisition of Ari Emanuel-led Endeavor and EQT’s $2.8 billion acquisition of Keywords Studios. Permira’s privatization of Squarespace for about $7 billion also fits into this category. I wouldn’t say going private is a great sign of the sector’s health, but if the deals are happening, the assets are still important.
I really don’t know how to feel or think about these Frankenstein-like sectors. (By the way, this isn’t just MEG on Crunchbase; I think TMT is also a suboptimal grouping all the time.) I think it’s always been inappropriate and appropriate to put Disney in the same category as sports deals, cough-coughs, and news businesses. After all, Disney has made some of the most famous sports deals of all time (looking at you, ESPN), and a big part of the Warner Bros. Discovery story is from CNN. But do all media, entertainment, and gaming companies have the same challenges? Should we put them all in the same category? I think it depends on how you look at it. Perhaps it’s just a reminder that sometimes we talk about sectors as monoliths and don’t take into account the huge variability within them.
Either way, there’s no denying that the overall MEG data has been pretty bleak so far this year. Looking back at Crunchbase’s 2023-focused report, the data company calculated that of the 191,000 tech layoffs tracked in 2023, 45,000 were at MEG companies. The report at the time also showed that global venture funding into the sector fell 62% in 2023, after falling 22% in 2022.
So things seem to be looking up for MEG, which at least if you believe Shakespeare in Love, has always been the case in the industry.
In the film, after a frantic theater owner, played by Geoffrey Rush, assures his yelling creditors that all will be well, the creditors again ask a very legitimate question: How?
“I don’t know,” Rush said. “It’s a mystery.”
see you tomorrow,
Allie Garfinkle
Twitter: Agarfinx
Email: alexandra.garfinkle@fortune.com
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The Deals section of today’s newsletter was curated by Nina Ajemian.
Venture Transactions
– Lettuce, a San Francisco, California-based company that provides automated tax and accounting systems, raised $15 million in Series A funding from Zeev Ventures.
– Efficient Capital Labs, a New York City-based capital provider to B2B SaaS companies, raised $11 million in Series A funding. The round was led by QED Investors and 645 Ventures, with participation from FJ Labs, Eudemian Ventures, and existing investors Riverside and Generalist.
– Grid Status, a Chicago, Illinois-based power grid data and analytics platform, raised $8 million in funding. The round was led by Energize Capital, with participation from NFDG Ventures, Rayburn Electric Cooperative, Evergreen Climate Innovations and others.
– GenLayer, a Lewes, Delaware-based AI-powered blockchain platform, raised $7.5 million in seed funding. The round was led by North Island Ventures, with participation from Node Capital, Arrington Capital, ZK Ventures, and others.
– Cairn Surgical, a Lebanon, New Hampshire-based breast cancer surgery technology developer, raised $4.5 million in Series A2 funding from Morningside Ventures.
– Optiml, a Zurich, Switzerland-based real estate investment and renovation planning platform, raised $4 million in pre-seed expansion. The round was led by BitStone Capital, with participation from KOMPAS VC, Innovation Endeavors, Planet A Ventures, and existing investors.
Private Equity
– LawnPRO Partners, backed by HCI Equity Partners, has acquired Fairway Lawn & Tree Service, a lawn care and tree, shrub and pest control service based in Cape Cod, Mass. Financial terms were not disclosed.
– Kian Capital-backed SPATCO Energy Solutions has acquired Blue1 Energy Equipment, a Greenville, S.C.-based storage and distribution equipment provider. Financial terms were not disclosed.
end
– QualiTech, a MidOcean Partners portfolio company, has acquired Ellison Bakery, a Fort Wayne, Ind.-based manufacturer of bakery products, from Tilia Holdings. Financial terms were not disclosed.
other
– The Japan Tobacco Group has agreed to acquire Miami, Florida-based tobacco company Vector Group for $2.4 billion.
– Thomson Reuters has acquired SafeSign Technologies, a specialist law LLM developer based in Cambridge, UK. Financial terms were not disclosed.
Initial public offering
– Toronto, Canada-based Brasil Potash, which operates a potash mining project in the Brazilian state of Amazonas, has filed to list on the New York Stock Exchange. The company is backed by CD Capital, Sentient, and Forbes & Manhattan.
people
– Piva Capital, a San Francisco, California-based venture capital firm, has hired Lee Larson, formerly of TPG Rise Climate, as an investor.
– Touring Capital, a San Francisco, California-based venture capital firm, has added Ray Cao and Abhishek Kumar as partners. Cao was previously with Agora Brands and Kumar was with Microsoft.
– Water Street Healthcare Partners, a Chicago, Illinois-based private equity firm, appointed Kristin Stepany as vice president, formerly with Sterling Group.