M&A reports released in the past week show digital media and ad tech acquisitions continuing at a healthy clip.
The trend is driven by increasing exit opportunities. Internet giants, commerce and retail businesses, media companies, agencies, enterprise clouds, private equity firms and telcos are all active M&A parties for data-driven digital startups, said John Prunier, partner at the investment banking firm Petsky Prunier.
“Where their interest breaks down now is less about engineering talent and tech capabilities, as in earlier online ad and media deals, and more about startup pricing models,” he said.
Petsky Prunier’s Q1 2017 M&A report underscored the range of players on the field. WPP led with eight media or technology acquisitions in the quarter, but the next six biggest buyers – Live Nation, Comcast, Dentsu, Rakuten, Google and Salesforce – represent a wide range of exit categories.
The investment banking firm JEGI also traced growing big-dollar deals to major consulting firms.
Bain Capital partnered with Yonghui Superstores, a Chinese supermarket chain, to co-purchase the consumer marketing firm Daymon Worldwide for $413 million, the largest agency transaction of the quarter. Huron Consulting Group spent $134 million on Innosight, a brand growth and strategy firm, and Accenture bought the digital agency SinnerSchrader for $113 million.
Luma Partners clocked 13 ad tech deals this quarter with 11 acquisitions valued at more than $100 million, a pace similar to its M&A category results for every quarter over the past year. Petsky Prunier likewise reported steady sales, with a total of 293 digital advertising or mar tech deals in the past quarter after reporting 305 such acquisitions to end 2016.
But reading too deeply into M&A activity in a three-month period can be misleading, Luma Partners founder and CEO Terry Kawaja told AdExchanger. The second quarter of last year, for instance, was blessed with multibillion-dollar Microsoft and Tencent acquisitions of LinkedIn and Supercell, respectively.
But still, the number of active buyers is lifting exit prospects for many mid- and late-stage startups, Kawaja said. “Five years ago, it was almost heretical to say telcos would be active in the space, and now they’re the usual suspects.”
The ad tech ecosystem may finally be seeing real consolidation. For the first time since Luma began producing quarterly “Lumascapes,” the number of new startups added to SSP, DSP and DMP categories were outpaced by the number of exits.
“It’s an imperfect metric,” Kawaja said, “but a healthy sign of maturation that existing companies and capabilities aren’t being replaced on the market.”
The trend toward consolidation could also keep prices strong as independent ad tech acquisition options dwindle via M&A or IPO, he said. “In any given category, there are still two to five scaled companies that could be strong contenders for exits.”
