final yr, universal music group Acquired 70% shares Music catalog recorded by RS Group in Thailand About $45 million (plus a possible Roughly US$5 million bonus cost). At the moment, MBW tell you “Common Music Group is predicted to hold out extra M&A actions in Asia.”
Nicely, that is not the boldest prediction we have made. However, effectively, we’re not flawed.
UMG It has now confirmed that it lately accomplished the remaining acquisitions 30% RS Group’s catalog, absolutely owned recording portfolio.
MBW additional confirmed that this extra transaction price UMG is roughly $18 millionthe potential further bonus price is roughly Greenback US$2 million.
in different phrases, UMG solely Accomplished the acquisition of Thailand’s second largest recording catalog for a complete sum of approx. Greenback US$65-70 million.
Fascinating. However the larger story is what occurs subsequent.
Speech at UMG in London final Tuesday (September 17) Capital Markets Day (CMD)a number of international executives deal with the corporate’s future acquisition technique “Excessive potential” Streaming monetization is predicted to blow up within the coming years.
The “excessive potential” areas talked about embrace massive music markets equivalent to China and Indiahowever different markets additionally acquired their due, together with Nigeria – UMG acquires majority stake marvin records last year – add Vietnam, Indonesia, and Thailand.
“We’re contemplating strategic acquisitions in these high-growth potential markets.”
Sir Lucian GrangeUMG, spoke final week
On the CMD occasion, Sir Lucian GrangeCEO and Chairman of Common Music Group (UMG) mentioned Common Within the coming years, these markets will undertake a “three-pronged” technique, overlaying three areas: native A&R, and companies offered to native entrepreneurs by way of Virgin Music Group, and eventually, mergers and acquisitions.
It’s defined that this M&A exercise (Music corporations in rising areas) might be achieved by way of the next strategies Money from UMG’s personal steadiness sheetin stark distinction to catalog acquisitions in mature streaming markets equivalent to the USA. (Grainge explains that these U.S. directory-type transactions will undergo chord musicthe place UMG is Minority partners join majority shareholder Dundee Partners.)
“We’re contemplating strategic mergers and acquisitions in these high-growth potential markets,” confirmed grungenoting: “We’re speaking about [relatively] Small markets and small corporations, however entrepreneurs [to date] Proudly owning the rights to the whole place – that is the place Virgin comes into play.
Boyd MuirUMG’s EVP/CFO expanded on this, noting that Virgin Music Group will assist UMG “deliver entrepreneurs and labels into our ecosystem” in these markets, “after which as soon as they’re in, issues simply will occur; “over time, there might be alternatives to purchase them”.
“The fact is,” Muir mentioned, “that over time we will enhance our presence in these markets by way of acquisitions, and we absolutely intend to do this.”
(Grange later quipped: “Sadly, I can not purchase sony;I might purchase it if I might Warner moreover! His level: In Grange’s eyes, a one-off, transformative acquisition appears to be like like Common Music Group (UMG) acquired EMI Music in 2012 The bottom is now sparse, however there are nonetheless lots Smaller M&A alternatives Obtainable in a fast-growing market dominated by native performs.
“By mergers and acquisitions [we can] To extend our presence in these markets, we absolutely intend to… [via Virgin Music Group we can] Bringing entrepreneurs and types into our ecosystem… as soon as they’re in, one thing occurs – over time, there might be alternatives to purchase into them.
Common Music Group Boyd Muir spoke final week
adam graniteThe manager vice chairman of market improvement mentioned Common’s technique in “high-potential markets” in additional element and revealed that Common has Just opened Its fifth workplace in Larger China, Shenzhen. This new location joins UMG’s places of work in Hong Kong, Taiwan, Beijing and Shanghai, China, as China will grow to be the second largest digital music market on the planet by 2023.
Usually talking, when speaking about “excessive potential” markets, granite famous: “The digital-first nature, lack of legacy methods and processes, and decrease price constructions imply [these markets] Could be very worthwhile, particularly if the present can discover an viewers in a better ARPU market.
“Given this, our funding right here ought to maintain worthwhile development [UMG] Complete.
granite He then turned his consideration particularly to 3 fast-growing markets, all in Southeast Asia: Indonesia, Vietnam, and Thailand. (granite Affirmation of acquisition of remaining shares by UMG 30% RS Group catalog within the latter area.
of IndonesiaGranite mentioned: “Indonesia is a rustic with a big inhabitants of roughly 275 million Individuals… solely actually began investing in 2015… [UMG is] Presently in a number one place out there.
He identified that since its funding in 2015, UMG’s income in Indonesia has elevated eightfold and EBITDA has elevated 25 instances.
The granite is then transferred to Thailandcalling it “the quickest rising market in Southeast Asia.” He mentioned UMG has elevated its market share within the area since 2018 50% By “Native A&R [and] By mergers and acquisitions”.
He identified UMG A price ticket of roughly $70 million is predicted to be paid “only one yr after integration into the Common system” RS Group The listing will grow to be “legitimate” 11.5 instances EBITDA [multiple] in a quickly rising market.”
Claiming that with this deal and “another offers to come back” graniteUMG is now “on observe to grow to be the market chief” in Thailand.
of Vietnam“We did not launch an area model there till 2020, however right this moment we have virtually launched it,” Granite mentioned. 25% of Spotify Ranked within the prime 200, pushed primarily by our native language A&R and distribution companions.
So how will UMG really pay for its future? mergers and acquisitions Offers in “excessive potential” markets?
Boyd Muir Explaining UMG’s forecast ultimately week’s CMD occasion change 60% to 70% Adjusted Annual EBITDA Converted to Free Cash Flow4 years forward of funding exercise.
He additionally confirmed UMG Promise to pay dividends to shareholders 50% Adjusted internet revenue yearly. That is the components decided by an present tripartite settlement between UMG and its two largest shareholders: Vivendi/Bolloré Group plus one (two components) Tencent dominates consortium.
To offer an instance of what this all may imply, let’s do two fast calculations:
- For fiscal yr 2023, Common Music Group introduced Adjusted Annual EBITDA of €2.369 billion ($2.56 billion). If we comply with Muir’s (future-oriented) components 60-70% Adjusted EBITDA converts to free moneywhich would go away UMG with free money reserves of roughly US$1.66 billion;
- Additionally in fiscal yr 2023, UMG introduced Adjusted annual net profit of €1.595 billion ($1.73 billion). Contemplating Muir’s feedback, 50% A portion of this internet revenue might be retained as dividends to shareholders – i.e. approx. $865 million.
Judging from these two calculations, then, so long as UMG’s future earnings do not shrink in comparison with fiscal 2023, it looks like it might simply personal tons of of tens of millions of {dollars} New free money yearly Potential M&A Funding In a “excessive potential market”.
(Once more, that is again Divide the quantity required for dividends based mostly on 50% of the adjusted internet revenue.
“We really feel very snug and assured within the post-dividend, natural development of those companies. [‘high-potential’] Market, we will make investments, we will purchase, we will actually construct an amazing firm.
Sir Lucian Grange, Common Music Group
Muir At a CMD occasion final week, UMG particularly mentioned UMG’s willingness to spend its post-dividend money on “high-potential” markets.
“We made a big dedication…to pay dividends,” he mentioned [at 50% of adjusted net profit].
“The place we’re right this moment is we predict that as a way to obtain future development we actually ought to Make investments our remaining money Combine into the expansion underneath building [with the] Virgin Music Group Enterprise [and] Excessive potential market.
“We’d be remiss if we didn’t help this chance by way of sensible motion. [not] Make investments our remaining money into it.
further grunge: “We’ve got to be practical about what money we want and what we want in money.
“We really feel very snug and assured within the post-dividend, natural development of those companies. [‘high-potential’] The market, we will make investments, we will purchase, we will actually construct an amazing firm for the subsequent 10, 15, 20 years and even longer.international music enterprise
