Ad Tech M&A Is On The Upswing In 2019 As TV And PE Lead Consolidation

Advertising technology acquisitions are back in vogue.

There were 86 ad tech deals during the first three quarters of 2019, almost double the M&A activity last year, according to a report published Monday by Results International Group, an investment advisory firm.

Results International typically doesn’t break out ad tech for its overall marketing technology and services report, but decided to this year because of the upswing in deals and valuations of some public companies, said Paul Georges-Picot, a director and leader in the firm’s mar tech practice.

“It’s a bit early to talk about an ad tech rebound,” said Georges-Picot, who knows the category as a former corporate strategy VP at 24/7 Media and Xaxis.

Despite strong stock performances in the past year or two, which he said are more outliers and trend-based investing and not a rising-tide-lifts-all-boats situation – the real driver of ad tech deals this year has been private equity and television. The average deal value has also remained about the same, despite the big stock market gains, he said.

Historic ad tech strategics such as Google, Adobe and Oracle weren’t as active the past year, instead focusing on their own tech and integrating previous acquisitions. But the mid-market category is booming, with private equity investors, ad agencies and new marketing and tech holding companies like S4 Capital and You & Mr Jones making deals.

Georges-Picot said this year has also seen a sudden swell of activity from “left field acquirers” such as McDonald’s, Nike and other retailers or pharma companies that have bought up ad analytics to maximize their own data.

And deep-pocketed players are in the mix.

Consultancies have become a new pillar of the advertising strategic landscape, he said. One of the monster exits this year was Blackstone Group, a PE giant, dropping $750 million on the mobile advertising and app monetization startup Vungle. Accenture, Deloitte and smaller consultancies such as Capgemini are making investments as well.

Television companies also present a new strategic exit opportunity.

Broadcasters and tech or telco players with their sights set on Hollywood have consolidated the DSP and analytics category this year, he said. Amazon made its first ad tech deal this year when it bought the Sizmek ad server out of bankruptcy, and in the past couple of weeks (just outside the Q1-Q3 period covered by the Results International report) Roku and AT&T’s Xandr purchased the video DSPs dataxu and Clypd, respectively.

Competition from global media titans is making life difficult for DSP startups. Taptica, which acquired Tremor Video’s DSP in 2017, merged with RhythmOne this year. And the marketing cloud Zeta Global is buying and bartering its way to DSP market share, with deals for the Sizmek DSP and the DSP businesses of IgnitionOne and PlaceIQ.

Content recommendation, multitouch attribution and DMPs are other ad tech buckets that have “gone from full to having one or two companies left” in the past couple of years, Georges-Picot said.

The rebound in ad tech deals this year isn’t necessarily a good omen for the industry. Premiums tend to come down after the first one or two deals in a tech vendor category, which he said has been true for DSPs and ad measurement tech.

Some startups and M&A advisors are also trying to seize on the recent growth of public companies such as The Trade Desk, Roku or Rubicon Project, but that momentum-based M&A can backfire painfully, Georges-Picot said.

“Public valuations do inform private valuations, so some people are going to see this as the time to go to market,” he said. “But it’s a dangerous game, because when those valuations go down it’ll be even worse for companies trying to claim the same multiples.”

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