Not robust, but healthy with more reasonable prices. That’s how leaders of marketing firms and media outlets view the 2013 marketplace for mergers and acquisitions, in a new poll from AdMedia Partners.
Agencies are mainly on the lookout for deals that will bolster their capabilities in mobile marketing, analytics and social media marketing, while their media counterparts seek help primarily in digital, custom content and app development.
Accordingly, the prices that potential buyers deem reasonable for players in these hot fields are higher than those for anything old school, be it an ad agency, public relations firm or magazine. For example, buyers expect to pay up to seven times earnings for social media companies this year, but less than five times earnings for PR firms.
Tempering the optimism reflected in the poll’s findings are concerns about the economy and political wrangling around the national debt. And while some respondents remain bullish about the M&A market, given some positive economic indicators recently, AdMedia’s Seth Alpert is less certain about the road ahead.
“For 2013, the biggest wild card seems to be the economy,” said Alpert, a managing director at AdMedia, a boutique M&A firm in New York. “For example, if Congress decides to let the U.S. default on its debt by not raising the debt ceiling, we may see significant global economic disruption. That would have a significant impact on ad spending and pretty much everything else.”
Such X-factors are worrisome, but at least uncertainty around the presidential election is no longer a concern. As one unidentified respondent noted, “The fog of uncertainty has been lifted. If you want to sell, you probably don’t want to wait for another political cycle to take your business to market.” Said another unidentified poll taker: “People have been on hold for over 18-24 months. Now that they know the basic ground rules for the next four years, M&A will pick up.”
When asked to identify the most disruptive trends or technologies in their industries, marketing and media execs pointed to mobile, social media and digital as their Top 3. Other factors, such as free content online, the velocity of change and the rise of big data, ranked higher than analytics, automated marketing, the shift to digital and the economy.
On balance, the M&A market seems to favor buyers more than sellers this year. That said, the gap between those who believe it’s “act now” time for buyers versus sellers has narrowed significantly in the past three years.
In its 2010 poll, AdMedia reported that 92 percent of its respondents said it was prime time to buy, compared to just 32 percent to sell. (Some voted for both, thinking that buyers and sellers were on equal footing.) In this year’s poll, the figures were 70 percent to buy and 51 percent to sell—a 19-point difference, far less than the 60-point gap in ’10.
“It seems like it’s kind of a level playing field now,” Alpert said. “You can argue that multiples seem fair now to both parties. It says that it’s a good time to sell, a reasonably good time to sell compared to historical numbers.”