Why It Matters: While Lions Gates struggles to establish profitability, it excels in generating new content, as the company has a film and TV library of more than 17,000 titles, 90 TV shows across 40 different networks, with 59 major awards won.

“Since 2008, acquirers have been particularly targeting underperforming public firms, because underperforming public companies are more likely candidates for operational improvements and cost savings through merger synergies. Buyers also take advantage of public companies whose valuations have fallen the most during market downturns,” said Philip Whitchelo, Vice President of Strategy and Product Marketing at Intralinks.

Profitability: Since 2008, public targets have been 3.3% less profitable than public non-targets, Intralinks reported. In the first quarter of fiscal 2023, the net loss attributable to Lions Gate shareholders was $119 million. While Netflix (NASDAQ:NFLX) posted a gain attributable to shareholders of roughly $1.4 billion, as of June 30, 2022.

Leverage: Intralinks reported that public targets have had 11% less leverage than public non-targets since 2008. When evaluating the balance sheets for Lions Gate and Paramount Global (NASDAQ:PARA), it is evident that Lions Gate would have to issue more debt to increase its financial leverage to fall in line with its peers.

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Size: Next, public targets are 55% smaller than public non-targets, according to IntraLinks. Lions Gate's market capitalization is roughly $1.58 billion, while competitors such as Paramount have a market cap north of $12 billion.

Liquidity: Additionally, target companies have lower levels of liquidity than non-targets. Lions Gate has total current assets of $1.029 billion, as of the first quarter of fiscal 2023, while Paramount had total current assets of over $14 billion, as of June 30, 2022.