Why This Entertainment Company Could Be An Acquisition Target For Streaming Giants Amazon, Apple Or Netflix – Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN)

Lions Gate Entertainment Corporation LGF/A LGF/B is a motion picture entertainment studio with a presence in motion pictures, television programs, home entertainment and digitally delivered content. The company may become an attractive acquisition target as its subsidiaries and internal content typically release more than 25 theatrical releases each year.

Why it matters: As Lions Gates struggles to build profitability, it excels at generating new content as the company boasts a film and TV library of more than 17,000 titles, 90 TV shows across 40 different networks and 59 major awards.

“Since 2008, acquirers have been particularly targeting underperforming public companies because underperforming public companies are more likely candidates for operational improvements and cost savings through merger synergies. Buyers also benefit from listed companies whose valuations have fallen the most during market downturns,” he said Philip WhitcheloVice President of Strategy and Product Marketing at Intralinks.

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Growth: According to Intralinks, between 1992 and 2014, target companies tended to have higher growth rates than non-target companies. Although Lions Gate’s revenue and net income have been flat or declining for the past five years, the company’s treasury has grossed over $10 billion over the past five years. Additionally, Lions Gate’s worldwide streaming subscribers grew 57% year-on-year to 26.3 million in the first quarter of 2023, for a total global subscriber base of 37.3 million.

Profitability: Since 2008, public targets have been 3.3% less profitable than non-public targets, Intralinks reported. For the first quarter of fiscal 2023, net loss attributable to Lions Gate shareholders was $119 million. While Netflix NFLX reported net income attributable to shareholders of approximately $1.4 billion as of June 30, 2022.

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Leverage: Intralinks reported that public targets have had 11% less impact than non-public targets since 2008. In assessing the balance sheets for Lions Gate and Paramount Global PARAGRAPHit is obvious that Lions Gate would need to take on more debt to increase its financial leverage and catch up with its competitors.

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Size: Also, according to IntraLinks, public targets are 55% smaller than public non-targets. Lions Gate’s market cap is around $1.58 billion, while competitors like Paramount have a market cap of over $12 billion.

Liquidity: In addition, target companies have lower liquidity than non-target companies. Lions Gate had $1.029 billion in total assets for the first quarter of fiscal 2023, while Paramount had over $14 billion in total assets as of June 30, 2022.

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Valuation: Finally, public companies in the bottom three valuation deciles are on average 30% more likely to become acquisition targets, reports Intralinks. After analyzing Lions Gate’s valuation metrics and profitability metrics, the data shows that investors are placing more value on Paramount, another likely acquisition target.

The last word: After analyzing six metrics that represent a good acquisition target, it is evident that Lions Gate meets most of the requirements. As streaming giants such as Amazon.com AMZN and apple inc AAPL competing for more subscribers and content, it may make sense for one of them to buy Lions Gate in the future.


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