Every year, global business consultancy Ernst & Young conducts a review of the top 10 risk factors across a range of industry sectors. This year, unsurprisingly, the number one risk cited by all respondents was the effects of the financial crisis and the lack of credit.
Except, that is, in the technology, media and telecom (TMT) sector, where the threats posed by new technology, newly liberalising markets and globalisation were identified as the most challenging issues, whereas the financial crisis was of only marginal concern.
This is not to say that TMT companies are unaffected by the dramatic economic turbulence of recent months, but that they have more pressing things on their minds.
Indeed, some recent reports show specific areas of TMT bucking the general downward trend and registering some quite spectacular gains.
United Kingdom-based law firm Freshfields announced in October 2008 that the UK TMT sector had recorded its highest level of foreign investment since the end of the dot-com boom, with £12.6 billion (Dh67.45bn) committed by foreign acquirers in 132 deals between January and August.
This, said Freshfields, was more than three times the amount spent on the sector in 2007 and higher than any year between 2001 and 2005. (Figures for the UAE were unavailable).
Freshfields attributes the figures to a fall in valuations, which could itself be due to the falling pound in relation to the euro and the dollar, along with the migration of advertising revenues to online media and the consequent drop in traditional publishing companies' valuations.
"The market really seems to have picked up," said Natasha Good, partner at Freshfields.
"The publishing sector is facing a tough time from the migration of revenue online, but there are a number of businesses with their home in print, where people can help good titles make the transition online. The valuation of some of these publishing businesses seems low to foreign acquirers."
Good compared some of the larger publishing houses to "wounded beasts" being attacked by aggressive, more nimble start ups.
In other parts of the TMT universe, there are exciting developments that have attracted more foreign attention.
In wireless and mobile communications, such as wireless broadcasting to wifi, "investors will continue to be interested," said Good. "IT service companies are quite high on the list for investors."
In contrast to the mega deals of recent years, the market today is characterised by a larger number of smaller-sized deals, according to Good.
"Some of this is more speculative," she said. "Private equity has had some role but I don't think it has been the key driver."
Some key players are less enthusiastic about the current and future level of dealmaking in the sector.
Crevan O'Grady, head of media at private equity group 3i, characterised the environment as "frozen".
"People are not selling unless they have to, they're sitting on capital and there's next to no debt available," he said.
His own patch of TMT, the media industry, was "down more than most", he said.
"Any real economic downturn will be felt heavily by parts of the media, particularly those affected by the shift from old to new media with the pressure on advertising budgets. It's a structural decline."
To emphasise the scale of the changes afoot, O'Grady pointed to the market capitalisation of Google and its smaller (but still substantial) rivals.
"Google's market cap is something like $300bn (Dh1.1 trillion). All of that comes from advertising, and that market cap has come from somewhere else. So people have realised that certain business models, such as free-to-air television and directories such as Yellow Pages, are now in terminal decline. They're on a gentle downward slope."
The relatively slow pace of change from traditional to digital media in some mainland European countries has ironically made assets more attractive, said Natalie Tydeman at GMT Communications.
"Some of them are in a stronger position, and are able to go after acquisitions," she said.
"The big companies have not been as badly damaged by the switch that has happened in the UK."
One recent example is German publishing house Axel Springer acquiring various UK media assets, alongside the acquisition by Heinrich Bauer of Emap's publishing business for $1.4bn.
As advertising declines put increasing pressure on TMT business revenues, the importance of scale is consequently rising, says Tydeman. This helps to explain the rationale of the Thomson-Reuter merger, as each of the companies singly were under pressure from start up information providers. Tydeman believes that large terrestrial such as Britain's ITV are stuck in an unwinnable position, since they are unable to make the switch to an online business model without cannibalising their existing business.
She argued that the shift from print to online advertising is still in its early stages and will probably accelerate in the coming year.
"There is a good possibility that the recession will take it over the next hurdle," she said.
Tydeman expects to see a wave of divestment, as companies rid themselves of non-core assets, just as happened following the dot-com crash, as companies struggle to get access to cash.
Equally, lack of access to debt, and the difficulties of making profits through financial engineering has meant private equity investors in TMT have taken a back seat, while trade buyers are resurgent.
At GMT Communications, the focus is on mid-market deals and thus avoiding the use of excessive leverage.
"We're quite lucky in this market, and we do development capital deals where the growth of the business brings returns. The recession could have quite a positive effect," said Tydeman.
She anticipated consumer spending will be reduced by the recession, meaning that people will spend more time at home, going online and playing online games.
GMT invests in a number of companies providing these services, "so development capital could be quite fruitful over the next couple of years", she said.
In the United States, a company like Veronis Suhler Stevenson, a private equity firm specialising in mid-market media investments, has also noted its average deal size reducing.
Two years ago it would have been $250 million, now it is closer to $100m.
There have been a handful of large scale media deals in the US, including Bloomberg buying a $4.5bn stake owned by Merrill Lynch, and NBC Universal, Bain Capital and Blackstone acquiring The Weather Channel for $3.2bn. Much of the action for private equity firms has been equity recapitalisations, with equity owners buying back debt at a discount to reduce leverage.
On the prowl
Media market watchers note Middle Eastern, Russian and Indian investors are showing interest in US and UK assets.
Should valuations fall further, or cashflow problems emerge, there could be a flurry of acquisitions from such cash-rich investors.
In China, TMT M&A has consistently outperformed the market, with internet and software companies being especially highly prized.
Meanwhile, the fragile state of the overall TMT market, with its sporadic shoots of good news and optimism, continues to attract a smattering of investment attention. There is a great deal more change in prospect.