Last year, Universal Music Group acquired 70% Holds a music catalog recorded by the Thai RS Group of approx. $45 million (plus a potential Approximately US$5 million bonus payment). At the time, MBW told you it “expected UMG to conduct more M&A activity in Asia.”
Well, that’s not the boldest prediction we’ve made. But, well, we’re not wrong.
UMG It has now confirmed that it recently completed the remaining acquisitions 30% RS Group’s catalog, fully owned recording portfolio.
MBW further confirmed that this additional transaction cost UMG is approximately $18 millionthe potential additional bonus cost is approximately Dollar US$2 million.
in other words, UMG only Completed the acquisition of Thailand’s second largest recording catalog for a total sum of approx. Dollar US$65-70 million.
Interesting. But the bigger story is what happens next.
Speech at UMG in London last Tuesday (September 17) Capital Markets Day (CMD)several global executives focus on the company’s future acquisition strategy “High potential” Streaming monetization is expected to explode in the coming years.
The “high potential” areas mentioned include large music markets such as China and Indiabut other markets also got their due, including Nigeria – UMG acquired a majority stake in Mavin Records last year – plus Vietnam, Indonesia, and Thailand.
“We are considering strategic acquisitions in these high-growth potential markets.”
UMG Sir Lucian Grange spoke last week
At the CMD event, Sir Lucian GrangeCEO and Chairman of Universal Music Group (UMG) said Universal In the coming years, these markets will adopt a “three-pronged” strategy, covering three areas: local A&R, and services provided to local entrepreneurs through Virgin Music Group, and finally, mergers and acquisitions.
It is explained that this M&A activity (Music companies in emerging regions) will be achieved through the following methods Cash from UMG’s own balance sheetin stark contrast to catalog acquisitions in mature streaming markets such as the United States. (Grainge explains that those U.S. directory-type transactions will go through chord musicin which UMG is a minority partner, along with majority shareholder Dundee Partners.
“We are considering strategic mergers and acquisitions in these high-growth potential markets,” confirmed grungenoting: “We are talking about [relatively] Small markets and small companies, but entrepreneurs [to date] Owning the rights to the entire place – this is where Virgin comes into play.
Boyd MuirUMG’s EVP/CFO expanded on this, noting that Virgin Music Group will help UMG “bring entrepreneurs and labels into our ecosystem” in these markets, “and then once they’re in, things just will happen; “over time, there will be opportunities to buy them”.
“The reality is,” Muir said, “that over time we can increase our presence in these markets through acquisitions, and we fully intend to do that.”
(Grange later quipped, “Unfortunately, I couldn’t buy Sony; if I could, I’d buy Warners!” His point: In Grange’s eyes, a one-time, transformative acquisition as seen) Universal Music Group (UMG) acquired EMI Music in 2012 The ground is now sparse, but there are still plenty Smaller M&A opportunities Available in a fast-growing market dominated by local repertoire.
“Through mergers and acquisitions [we can] To increase our presence in these markets, we fully intend to… [via Virgin Music Group we can] Bringing entrepreneurs and brands into our ecosystem… once they’re in, something happens – over time, there will be opportunities to buy into them.
Universal Music Group Boyd Muir spoke last week
adam graniteThe executive vice president of market development discussed Universal Group’s strategy in “high-potential markets” in more detail, and revealed that Universal Group had just opened its fifth office in Greater China. Shenzhen. This new location joins UMG’s offices in Hong Kong, Taiwan, Beijing and Shanghai, China, as China will become the second largest digital music market in the world by 2023.
Generally speaking, when talking about “high potential” markets, granite noted: “The digital-first nature, lack of legacy systems and processes, and lower cost structures mean [these markets] Can be very profitable, especially if the show can find an audience in a higher ARPU market.
“Given this, our investment here should sustain profitable growth [UMG] Comprehensive.
granite He then turned his attention specifically to three fast-growing markets, all in Southeast Asia: Indonesia, Vietnam, and Thailand. (granite Confirmation of acquisition of remaining shares by UMG 30% RS Group catalog in the latter region.
of IndonesiaGranite said: “Indonesia is a country with a large population of approximately 275 million People… only really started investing in 2015… [UMG is] Currently in a leading position in the market.
He pointed out that since its investment in 2015, UMG’s revenue in Indonesia has increased eightfold and EBITDA has increased 25 times.
The granite is then transferred to Thailandcalling it “the fastest growing market in Southeast Asia.” He said UMG has increased its market share in the region since 2018 50% Through “Local A&R [and] Through mergers and acquisitions”.
He pointed out UMG A price tag of approximately $70 million is expected to be paid “just one year after integration into the Universal system” RS Group The directory will become “valid” 11.5 times EBITDA [multiple] in a rapidly growing market.”
Claiming that with this deal and “some other deals to come” graniteUMG is now “on track to become the market leader” in Thailand.
of Vietnam“We didn’t launch a local version there until 2020, but today we’ve almost launched it,” Granite said. 25% Spotify’s rise to the top 200 was driven primarily by our local language A&R and distribution partners.
So how will UMG actually pay for its future? mergers and acquisitions Deals in “high potential” markets?
Boyd Muir Explained at last week’s CMD event UMG expected to make the switch 60% to 70% Converts its annual adjusted EBITDA into free cash flow before investing activities over the next four years.
He also confirmed UMG Promise to pay dividends to shareholders 50% Adjusted net income annually. This is the formula determined by an existing tripartite agreement between UMG and its two largest shareholders: Vivendi/Bolloré Group plus one (two parts) Tencent dominates consortium.
To give an example of what this all might mean, let’s do two quick calculations:
- For fiscal year 2023, Universal Music Group’s adjusted annual EBITDA is €2.369 billion (US$2.56 billion). If we follow Muir’s (future-oriented) formula 60-70% Adjusted EBITDA converts to free cashwhich would leave UMG with free cash reserves of approximately US$1.66 billion;
- Also in fiscal 2023, UMG reported adjusted annual net income of €1.595 billion ($1.73 billion). Considering Muir’s comments, 50% A portion of this net profit will be retained as dividends to shareholders – i.e. approx. $865 million.
Judging from these two calculations, then, as long as UMG’s future profits don’t shrink compared to fiscal 2023, it seems like it could easily own hundreds of millions of dollars New free cash every year Potential M&A Investment In a “high potential market”.
(Again, that’s back Divide the amount required for dividends based on 50% of the adjusted net profit.
“We feel very comfortable and confident in the post-dividend, organic growth of these businesses. [‘high-potential’] Market, we can invest, we can acquire, we can really build a great company.
Sir Lucian Grange, Universal Music Group
Muir At a CMD event last week, UMG specifically discussed UMG’s willingness to spend its post-dividend cash on “high-potential” markets.
“We made a significant commitment…to pay dividends,” he said [at 50% of adjusted net profit].
“Where we are today is we think that in order to achieve future growth we really should Invest our remaining cash Integrate into the growth under construction [with the] Virgin Music Group Business [and] High potential market.
“We would be remiss if we did not support this opportunity through practical action. [not] Invest our remaining cash into it.
additional grunge: “We have to be realistic about what cash we need and what we need in cash.
“We feel very comfortable and confident in the post-dividend, organic growth of these businesses. [‘high-potential’] The market, we can invest, we can acquire, we can really build a great company for the next 10, 15, 20 years or even longer.global music business
