M&A Deal Values Are Up In 2018 As Cash-On-Hand And Ecommerce Values Soar

Despite broad concerns about the viability of online media and advertising, M&A in the sector is heating up thanks to the growth of ecommerce and commerce-based media solutions, like Apple’s purchase of digital subscription service Next Issue Media for an undisclosed amount.

The total number of deals in media, marketing and technology dropped by 7% in the first quarter of 2018 compared to the same period the year before, but the value of those deals more than doubled from $31.8 billion to $71.1 billion, according to a quarterly M&A report Tuesday from the investment bank JEGI.

The number of billion-plus dollar transactions also jumped from six in the first quarter of 2017 to 11 this year. Those include commerce-focused deals like private equity firm Sycamore Partner’s $1.1 billion acquisition of CommerceHub and SAP America snapping up CallidusCloud, a sales performance suite, for $2.6 billion.

But some of the biggest buys happened beyond ecommerce, like Thomson Reuters’s $11 billion merger with Blackstone Group and MuleSoft going to Salesforce for $6.8 billion. (Salesforce already has its ecommerce platforms – it bought Demandware in 2016 for $2.8 billion and this year bought B2B ecommerce platform CloudCraze for an undisclosed price).

There’s always a variable element with M&A because big-dollar deals can throw off averages.

But even overlooking those big acquisitions, M&A in 2018 is set to shatter the slow-growth roll of recent years, said JEGI CMO Adam Gross.

From 2016 to 2017, overall industry M&A grew by $6.5 billion, or about three percent. If the blistering pace of M&A from Q1 holds for the year, industry M&A is on pace to grow by $90 billion.

“The real trend that sticks out in recent months is a significant increase in value for transactions,” Gross said.

Petsky Prunier, another investment bank focused on media, tech and marketing, recorded 654 deals for a total of $22.1 billion in March, more than in any previous month in the past three years.

Marketing clouds had a pretty quiet 2017 and have become more selective acquirers, according to a LUMA Partners M&A report released Monday.

But corporate-friendly tax reform in the US and booming stock values for Salesforce and Adobe could open up M&A opportunities.

“There’s tremendous liquidity in the market right now in private equity and on corporate balance sheets,” Gross said, combined with cloud companies, particularly those with roots in commerce like SAP and Salesforce, looking for transformative acquisitions that could move the needle despite their large market caps.

Commerce-based buys are getting strong consideration from more than just marketing cloud strategics. Ecommerce and commerce services represented 23% of transactions in the past quarter, according to Petsky Prunier, but drove 37% of overall M&A revenue.

Contrarian opinion

But LUMA founder and CEO Terry Kawaja has a different take. Unlike JEGI, he notes that total ad and mar tech deals counts were up compared to the same time last year, but with fewer blockbuster deals.

Still, the acquisitions that are taking place are encouraging, he said.

WeWork’s acquisition of Conductor, a 13-year-old SEO and online marketing platform, likely came at a bargain, but it shows how new potential exits are emerging, Kawaja said.

Pandora’s $145 million deal for AdsWizz and Placecast, a location-based DSP, selling to the Swedish telco Ericsson also show how new categories can be ad tech acquirers. Late last month, Nike acquired the digital customer analytics startup Zodiac.

Cloud giants like Salesforce and SAP are well-understood acquirers searching for clear fits in their marketing stacks, Kawaja said, “but we track new entrants because it’s noteworthy that now companies outside the typical sectors are interested in the kinds of capabilities you find in the digital advertising and content landscape.”

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1 Comment

  1. I think Gross nailed it: “There’s tremendous liquidity in the market right now in private equity and on corporate balance sheets,”

    More money and lower cost of capital means higher valuations. This is a proven trend.

    I’m not sure that that means anything specific for adtech/martech. Is it a good sign overall? Maybe, if you are a seller (like Kawaja). I wouldn’t put any stock in it past that.