IWC acquisition talk signals bout of merger fever for indie

0 Comments | Sunday Herald, The, Feb 27, 2005 | by Steven Vass

IT'S courting season in the Scottish media, but some couples are more amicable than others. Lord Alli and equity group 3i are causing all sorts of heartache trying to woo Virgin Radio away from SMG.

Emap would love to tie the knot with Scottish Radio Holdings, but that company's muscular share price is keeping it from the altar.

Next to these twisted dalliances, television production companies IWC Media and RDF Media seem like teenagers in the first flushes of love. News of takeover talks between the two crept out last week, but this is a more conventional tale of two companies sitting down and talking to one another about whether to take their existing relationship a stage further.

First the introductions. IWC was formed from the merger of Glasgow producers Wark Clements and Ideal World last year. It is the biggest indie in Scotland, turning over around pounds-20 million last year. With strengths in drama, factual and documentaries, its recent hits include Channel 4's Location, Location, Location.

RDF is one of the new generation of superindies created from increasing consolidation in the sector. It is thought to have turned over about pounds-55m last year and has offices in London, Surrey and Los Angeles. As with IWC, it focuses on areas such as factual and drama, and is best known for Wife Swap.

Like its rivals, RDF is well placed to take advantage of plans to increase the broadcasters' programming quotas for what must be farmed out to indies. The BBC and ITV are both expected to see them rise from 25-per cent to 50-per cent of all programmes between now and 2007, which will go a long way to doubling the size of the sector.

RDF is one of several big players looking to cash in on the increase in quotas and with an imminent flotation, possibly in April, it will also catch the eye of the City. Funds from a flotation would then be used to fund more consolidation.

What it lacks is a regional presence to take advantage of twin plans to make TV production less London-centric. The BBC's proposals for its future, announced last December, included genre commissioners in Glasgow, Birmingham and Bristol; doubling network commissions in the nations;

making 50-per cent of network drama outside London; and shifting sport, children's and new media to Manchester.

Meanwhile broadcast regulator Ofcom wants to raise the beyond- London quotas for ITV to 50-per cent (Channel 4 and Five are to stay at 30-per cent and 10-per cent respectively). In summary, it's about to become a much bigger disadvantage for indies to be hemmed in to London.

Some would say that Scotland is particularly attractive.

Not only will it benefit from the BBC's plans for nations quotas and to base an entertainment and comedy commissioner in Glasgow, there is also the fact that Scottish Enterprise prioritises growing the creative industries through funding and other support. This has already encouraged Endemol, the Television Corporation (Mentorn) and All3Media (Lion Television) to set up Glasgow offices in recent years.

Although Sue Oriel, managing director of IWC, won't confirm or deny the talks between the two companies, she agrees that the regions have become a bigger priority for production companies.

"Regional quotas make regionally based companies very interesting, " she says. "It makes it harder for people to deliver if they don't have a regional base."

Paul Murray, managing director of Endemol Scotland, says it makes far more sense to buy into Scotland than start from scratch. Endemol chose the former route in 2001 when it bought Brighter Pictures, which had offices in London and Glasgow. And as an IWC production veteran who comes from Scotland, Murray helped improve Endemol's Scottish credentials when he was hired last year.

"I would be surprised if companies could just come from London and set up shop here and make a fist of it, " Murray says. "Lots of companies have tried it and failed.

Wall to Wall tried it 10 years ago in Glasgow. RDF tried it in Manchester and it didn't work for them."

For RDF, IWC is an obvious candidate: as well as being the biggest Scottish indie, it signed a deal last October which gives RDF first refusal on things like international rights and consumer products for factual programmes in return for development funding for ideas with strong international potential.

Although IWC is not thought to have sought a buyer, last year's Ideal World/Wark Clements merger has shown it believes in the benefits of scale, which include more development money, staff security, greater clout with broadcasters, more international possibilities and cost savings.

"When we merged Ideal World and Wark Clements, the combined cost of running the company is less than it used to be, " says Oriel, adding that the profit margin has gone up by several percentage points since the merger.

Add to this the rise in importance of the regions and new rules which allow indies to keep the rights to their programmes for the first time, and you have a good argument to get top dollar for your assets.