DataXu is exploring potential buyers and is working with investment bank GCA Advisors, according to a report in The Wall Street Journal, citing sources familiar with proceedings.
The video advertising outfit, based in Boston, declined to comment when approached by Adweek, but sources quoted by WSJ claim the pair is seeking an initial $300 million valuation.
DataXu helps match advertisers with online video audiences across desktop, mobile and OTT services, with clients using its demand-side platform (DSP) include Ford, Mastercard, pan-European broadcaster Sky and telecoms operator Vodafone, among a host of other household names.
The company has accumulated more than $87 million in funding since it was founded a decade ago and counts a host of tier-one backers, including Sky, now owned by Comcast, Flybridge Capital Partners and Thomvest Ventures.
A few years ago, DataXu had been the subject of takeover speculation by a major marketing cloud provider some years back with the sums then discussed closer to half a billion dollars, according to sources.
Simon Harris, head of programmatic activation at Amplifi, noted that three years ago, DataXu was reportedly seeking a $1 billion valuation. However, many felt it would struggle with this ambition due to competition from rivals like Google, Amazon and The Trade Desk (TTD).
“This appears to be reflected in the reported sales price, which is said to be $300 million, one fifth of what AT&T paid for AppNexus recently and around 95 percent lower than buy-side pure-play TTD current market capitalization,” he added.
Ciaran O’Kane, CEO of WiredCorp, told Adweek that a $300 million price-tag would represent attractive offer for any parties involved, given the attributes of DataXu’s tech stack and the current market climate.
“DataXu would not have the footprint of rival DSPs like TTD, MediaMath or AppNexus, but they have a sizable stronghold among some sizable brands [as clients] … at the end of the day, at $300 million, that’s quite cheap,” he said. “As far as who would buy it? Maybe a large brand looking to activate their own data, or maybe a telco. I think the market is getting tighter in terms of buyers, but at $300 million, that’s a pretty good price.”
In 2018, two of the major names in the telecoms industry have spent sizeable sums on ad tech with AT&T’s $1.6 billion purchase of AppNexus—a deal which acted as a precursor to the launch of its Xandr unit—and Singtel-owned Amobee purchasing Videology.
The reports of DataXu seeking an exit come as Sprint sold the assets of its mobile advertising unit to InMobi, and well-positioned sources tout another glut of mergers and acquisitions activity before the end of 2018.
Speaking during a presentation at last month’s ATS London conference, Jay C. MacDonald, managing partner of investment bank Digital Capital Advisors told attendees that the mergers and acquisitions market is interesting. This is primarily because of the returned interest of private equity groups as both investors and buyers in “mad tech”–a popular catch-all term for ad-tech and mar-tech companies.
“You’re seeing a large number of transactions happen where private equity groups, which only buy groups that are profitable and have scale, enter the fray,” he added, noting how the success of an exit strategy will ultimately depend on the balance sheet of a company.
This is primarily because a lot of investors and acquirers are no longer convinced of the prospect for mad-tech companies to experience exponential growth compared to a few years ago, and any potential buyer will likely bargain hard on price. “When the music stops you better be profitable,” MacDonald warned.