JEGI: 2019 M&A Could Shift To The Mid-Market

JEGI Co-President Tolman Geffs will speak at AdExchanger’s upcoming Industry Preview conference on Jan. 23-24, 2019 at the Grand Hyatt New York.

“There’s been a hell of a pullback investing in anything that remotely smells like ad tech,” according to Tolman Geffs, co-president of investment bank Jordan, Edmiston Group Inc.

But that’s not as dire as it sounds. Investors haven’t soured on investing in the space completely, they’re just being far more circumspect – and that’s not a bad thing, Geffs said.

“High-quality companies, and I’m using that phrase loosely, doing something that’s economically sensible that are data rights owners, have a clear chain of consumer consent and provide a benefit to consumers – those companies will continue to do well,” he said.

AdExchanger caught up with Geffs for his hot takes on investment trends.

AdExchanger: Back in December 2016, you told AdExchanger that “good business in ad tech will find owners.” Is that still the case?

TOLMAN GEFFS: Wait – I’m being held accountable for a prediction? But the answer is still yes. However, a “good business” has to cover two things. One, the business needs sustainable margins, not just arbitrage or dependence on the sheer intellectual talent of a few folks. There has to be an engine that delivers value and extracts a fair rent for that.”

Second, there should be some benefit to whoever’s data is being used and a clear consent chain. You have an awful lot of companies that are running a good business in the sense of profitability and growth, and they’re not doing anything specifically wrong from a data perspective, but it’s just not clear there’s a lot of long-term benefit to the consumer or that the consumer has given truly informed, explicit consent.

Has the renewed focus on privacy and data collection chilled investment and M&A activity in the ad tech space?

Early-stage seed and first-round funding has inevitably slowed, but so has growth capital in particular for these companies. There will continue to be a pause until the regulatory framework becomes clearer or, at least, we’ll see a greater deal of discretion and selection.

JEGI advised on the MediaMonks/S4 deal. Is Martin Sorrell building the holding company of the future and if that’s the case, what does that mean for the holding companies of the present?

The holding companies of the present are trying to move from being agency holding companies to being agencies. WPP has been explicit about this. The holding company pendulum will swing back toward a more integrated offering.

Sir Martin would not describe what he’s building as a holding company, but rather a platform of companies that will work well together and move toward delivering what the market needs faster, better, cheaper – and it has to be all three of those things.

There were some really big deals this year: AppNexus went to AT&T’s Xandr, Adobe bought Marketo and IPG got Acxiom Marketing Solutions, to name a few. Can we expect more mega deals in 2019 and where will we see them?

I think we can and one area we’ll see them in particular is mar tech for smaller businesses. Mar tech for the enterprise has been coming along nicely, but the most economic activity comes from small businesses, and technology for those guys is going to be an increasing area of interest.

What types of technologies are CMOs clamoring for?

First and foremost, it’s companies assisting in the digital transformation of the customer experience. The whole experience is getting digitized and advertising is just a small piece of that – and not the most important piece. Now it’s not, “Gee, let me build a website,” it’s the digitization of the entire awareness, qualification, intent, purchase, consumption, satisfaction and repurpose cycle.

Technologies that enable large enterprises to do that are in a good position.

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