The entertainment and recreational services industry comprises various consumer discretionary services including areas such as sports, dance, tourism and gambling and other recreational activities. Businesses in this industry primarily rely on caterers and restaurants, alcohol distributors, sports merchandise retailers and other facility maintenance services. The entertainment industry has high barriers to entry and organizing large scale events requires high initial capital as well as strong industry connections and networks. The industry is in its growth stage with the exception of the gambling sub-industry which is in its decline stage. The industry grew between 3-5% annually over the last five years depending on the sub-industry and target demographic. Positive consumer sentiment, high discretionary spending and increasing exogenous income helped generate high demand. This trend will continue to generate demand going forward as affordability and standard of living continues to advance. In addition, increasing globalizations and demand from international tourists will further generate tailwinds for the industry. This growth in demand will partially be offset by rising interest rates and growing household debt which will reduce discretionary spending. Over all, despite a minor slow down in the rate of growth, the industry will continue to grow at a higher rate compared to the market.
Macroeconomic factors – Since this industry is extremely consumer-centric, the industry performance is highly dependent on consumer sentiment and disposable income. These factors are largely determined by the larger macroeconomic background, such as inflation and economic prosperity.
Technological developments – Technological developments dictate consumer interaction with the industry; similarly, companies offering entertainment services must find ways to adapt to these changes. For instance, casinos now find themselves in competition with online gambling platforms.
Selling an Entertainment Company
M&A activities in the entertainment industry require in-depth expertise with the company’s markets. As Canada’s leading private market M&A Advisory firm, Beacon understands that selling a business is an important decision. A dedicated business owner not only seeks to extract maximum value from the sale of a business but also seeks to sell the business to a competent buyer who can continue the company’s legacy. Beacon has worked on valuation and M&A advisory mandates in the entertainment industry, bringing extensive experience in deal negotiation to the table. Our experienced advisory team will assist your business in navigating the entire sell-side M&A process.
As an entrepreneur or business owner who is exploring a potential sale, it is important to understand some key factors specific to the entertainment industry that might impact the likelihood of a potential sale. These are factors that determine business attractiveness for potential buyers and investors.
Cyclicality and seasonality – Within this industry, sports and tourism businesses operations are typically seasonal, with sports season and vacation seasons seeing the most sizeable revenues.
High barrier to entry due to capital requirements – companies in this industry often provide event-based services, and as such, there are high capital and supplier relationships requirements for companies in this industry.
With 140 years of combined experience serving businesses within Toronto, Ontario, and abroad, the Beacon transaction team has extensive knowledge and experience successfully working for several entertainment companies from a variety of industries. Whether it be a valuation or sale, our team can provide expertise and resources found only at larger corporations, paired with the personalized touch of our M&A Advisory team. Contact us today to get in touch with one of our advisors.