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Deal sizes move higher as M&E companies zero in on transactions that deliver scale effi ciencies, provide access to growth markets or improve digital capabilities In the 13th edition of the Capital Confi dence Barometer, media and entertainment (M&E) executives are more confi dent about the global economy and key market indicators than 12 months ago. However, various cyclical and secular headwinds, such as foreign currency volatility and earnings pressure arising from the industry’s ongoing digital transformation, are tempering enthusiasm. Despite these challenges, nearly 60% of M&E respondents expect their company to actively pursue acquisitions in the next 12 months, an increase of 20 points compared to a year ago. Further, confi dence in deal fundamentals, particularly the number and quality of acquisition opportunities, is on the rise. Unsurprisingly, digital disruption and the accelerating pace of business innovation and market evolution continue to have the greatest impact on the strategic outlook for M&E. In terms of their M&A strategy, while a quarter of M&E executives are looking to strengthen positioning in existing markets, 75% say they’ll be looking outside of their sector to access new technologies or expand into new end-markets. Target deal sizes are moving higher as M&E companies explore acquisitions that will “move the needle” in terms of growing scale (often in response to transactions announced by industry peers/ competitors) or enhancing digital capabilities and presence. At the same time, M&E leaders remain mindful of shifts in valuations compared to business fundamentals, as well as conditions in the equity and debt capital markets that are critical to acquisition funding. In addition to acquisitions, M&E players with diversifi ed businesses are reviewing their portfolios on a regular basis to determine whether capital and management resources are being allocated to the most promising opportunities. In some cases, the strategic review will lead to transactions that re- shape the portfolio and re-position the company for future growth. As M&E executives look forward, they overwhelmingly expect the global M&A market to remain strong in the year ahead. To thrive in an era of rapid industry change where scale is often a key advantage, an active M&A strategy will complement execution in the core. Finally, I would like to recognize Tom Connolly, who is retiring from EY in December 2015 after more than 20 years of dedicated service to our clients and the organization. Tom was instrumental in building EY’s M&E practice, and is a friend and mentor to many across our organization and throughout the industry. We will miss Tom and wish him the best in his retirement. John Harrison Global Leader, Media & Entertainment Transaction Advisory Services Capital Confi dence Barometer | 3

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