What Will Drive the Next Wave of M&A in Mar Tech?

Can a new breed of acquirers breathe life into a fluctuating market?

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Media and mar-tech deals jumped to 351 in 2019, up from 258 the previous year. Will eagerness to fend off emerging competition spur more in the 2020s?
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After a relatively quiet 2018, last year was a pretty boisterous party for mar-tech mergers and acquisitions.

Driven by legacy television players, like AT&T, eager to get ahead of the fast-emerging connected TV sector and midmarket players pooling their fortunes, Luma Partners found, the number of media and mar-tech deals jumped to 351 in 2019, up from 258 the previous year.

With the calendar flipping to a new year, some execs are hoping brands eager to future-proof themselves against digital native interlopers will spur similar exits in the 2020s.

Luma’s report also showed how the period was notable for the number of ad-tech exits in excess of $100 million (seven in total in 2019) compared with the previous year when there was only one such deal. These include Roku’s purchase of video-focused demand-side platform Dataxu in a deal worth $150 million, Taboola and Outbrain’s merger in a deal that values the combined entity at $850 million and the $178 million merger of Taptica with RhythmOne (aka Tremor International).

A tale of mixed fortunes

However, while the period was characterized by such big-ticket deals, there were arguably just as many fire sales, such as the sell-off that followed Sizmek’s Chapter 11 filing in early 2019. The past 12 months witnessed several other high-profile ad tech casualties, and it can be argued regulation, and the specter of coming regulation, has sped up the the ad-tech shakeout.

Luma Partners vp Conor McKenna observed that while the total volume of deals was driven by “capitulation sales” there were also some impressive exits.

“That said, 2019 saw the largest number of scaled ad-tech transactions—those over $100 million—of the last three years, with considerable momentum at the end of the year,” he said.

Defensive measures from the old guard

Luma Partners, a high-profile investment bank in the sector, consulted on some of the period’s more notable deals like the acquisition of Clypd by AT&T’s Xandr in a deal that builds on its acquisition trail of recent years, including its multibillion-dollar purchase of AppNexus in 2018, as it seeks to modernize its ad offering for media buyers.

Such deals are typical of legacy TV players maneuvering to protect their stake in the ad game as Big Tech players such as Amazon, Facebook and Google eye advertising budgets traditionally reserved for broadcast media. While such measures have also come in the form of “big media consolidation,” such as the Viacom-CBS merger, another key component in recent years has been purchasing CTV capabilities, McKenna said.

He told Adweek to expect more such activity in the near future as well as acquisitions from “other ecosystem players” moving into the space. McKenna pointed to data onboarding company LiveRamp’s $150 million purchase of DataPlusMath as indicative of this trend.

Midmarket players embrace scale

Luma Partners also counseled Rubicon Project during negotiations leading up to its recently announced merger with fellow publicly listed outfit Telaria, both of which had initial public offerings (in 2014 and 2013, respectively) valuing the pair collectively at $860 million. That echoed the mergers of former rivals Outbrain and Taboola as well as the pairing of RhythmOne and Taptica, with many noting such moves are now essential to achieve scale as Big Tech gains more and more share of advertiser spend.

McKenna said that while size has always been an important differentiator among small- to midsize tech companies, many that have failed to achieve the necessary scale have fallen by the wayside in recent years.

“What we’re seeing now is [a] doubling down on scale from strong, middle-market independents in order to take on the large tech platforms,” he said.

A new breed of buyer

Meanwhile, brands are starting to purchase mar-tech wares as they look to fend off competition from upstarts such as DTC brands.

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