Nielsen Deal May Press Mute on its Critics

The storied television ratings company Nielsen Holdings plc has announced that it will be acquired by a private equity consortium in an all-cash transaction valued at $16 billion. After a century of surveying consumer trends, the public company will be taken private as it seeks to modernize. While Nielsen’s “sweep” ratings periods were once “make or break” for television shows, an increasing chorus has questioned the company’s relevance in the digital age. However, Evergreen Coast Capital Corporation and the consortium are confident that “Nielsen is deeply embedded in the media ecosystem and a trusted service provider to its customers.” 

Evergreen and its partners are so confident, in fact, that the acquisition price represents a 60% premium over Nielsen’s unaffected stock price and a 10% premium over the private equity companies’ previous proposal. The transaction agreement also includes a 45 day “go shop” period that permits Nielsen to solicit competing bids. 

Present in under 8% of deals, go shop provisions are more common when a public company is being acquired by a financial sponsor, as is the case in the current deal. And the agreement’s 45 day period is a particularly generous one, since the mean duration for go shop provisions has been 37 days historically. By permitting Nielsen to seek higher bids, the agreement helps satisfy Nielsen directors’ fiduciary duties to maximize shareholder value. However, some have criticized such provisions as mere “window dressing” since they rarely lead to additional bids.  

Go Shop frequency since 2007

Becoming more common over the past 12 months

Source: Matterhorn Transactions

Counting viewership has always been an imprecise process. Unable to monitor every American’s viewing habits, Nielsen relies on statistical sampling, much like the approach of pollsters during elections. The company attempts to sample households that collectively represent a demographic cross section of the U.S. population, categorizing viewers according to gender, race, income, and other factors. The company collects data from these individuals via meters placed in the viewers’ homes and other digital tracking methods. The company tests these results against quality checks and visits to viewers’ homes. 

But as viewing habits shift from families watching a television set at particular times each week, some have questioned Nielsen’s ability to keep up with the times: “Nielsen is still trying to figure out how to monitor, such as a football game watched via mobile device; the playback of a cable movie via DVR more than a month after it was recorded; a binge-watch on any popular ad-supported streaming hub; or even the sampling of a new program on a cable network that is too small for Nielsen ratings to apply to it.” 

Tension between the television networks and Nielsen boiled over last year, with the Media Rating Council finally voting to strip Nielsen of its accreditation. While loss of this backing was viewed as an opening Nielsen’s competitors, the company stated that all of its top clients have renewed their contracts over the past 3 years, and revenue in the Q4 of 2021, the quarter immediately following the loss of MRC accreditation, Nielsen’s revenue actually rose 3.7% to $647 million. 

Nielsen has countered that the company has made strides toward collecting additional data, and now, “As a private company, Nielsen will be even better positioned to deliver the best measures of consumers rapidly changing behaviors across all channels and platforms.” As imprecise as ratings may be, Nielsen remains crucial as its data “remains the bedrock element of most TV advertising deals.” 

According to Matterhorn’s comprehensive M&A database, which harnesses AI to track current and historical deals, Nielsen was advised by law firms Wachtell, Lipton, Rosen & Katz and Clifford Chance, and financial advisors led by J.P. Morgan Securities LLC. The private equity consortium was advised by law firms Gibson, Dunn & Crutcher LLP and Davis Polk & Wardwell LLP, and financial advisors led by Bank of America Securities.