Marcoms Mergers & Acquisitions has seen a strong Q1, with transaction volumes up around 10% year-over-year vs. Q1 2020. Most predictions for 2021 centered around the ongoing market disruption and innovation, and Q1 hasn’t disappointed.
Networks have grabbed the headlines as speculated sellers rather than buyers (like Publicis). Consultancies have been busy, but are largely laser-focused on data and digital transformation. Meanwhile, new-era groups (many PE-backed) are now driving a large proportion of deal volumes.
Fast-growth international consolidators grabbed the headlines: S4 Capital announced four acquisitions in January and a fifth in March. Jellyfish also got off to a roaring start this year after its Fimalac investment in 2019, announcing five deals in one fell swoop during February.
There were plenty more private equity transactions in Q1 2020 to add to an already exciting mix of buyer groups.
Buyers to watch
It’s safe to say the days when PE investors questioned whether marketing services was industry worth investing in are now far behind us. There’s been a flurry of international activity over the last couple of years, as innovative and disruptive new-era groups take market share from the larger network groups and consultancy giants.
It’s making for a competitive, but fascinating landscape for acquisition—each offering more than just an end destination for sellers.
UK challengers
Hungry for both domestic and international growth, many of these groups are actively pursuing quality M&A opportunities and can often deliver more innovative deal structures than traditional acquirers.
Key ones to watch include Sideshow, as Waterland’s recent investment will likely turbo-charge activity levels. And it’s a similar story for IDHL, which took investment from Bridgepoint last month.
Croud, which received investment from LDC in November 2019, has yet to make an acquisition, but this is likely to change in 2021. Brainlabs has made several acquisitions since Livingbridge invested in 2019 and shows no signs of slowing.
US challengers
The U.S. is no different. Tinuiti and Real Chemistry (formerly W2O) both made the move to New Mountain Capital, continuing their growth plans after successful phases with Mountaingate Capital.
Both have been on the acquisition trail and they’re not alone. 3Q Digital took investment in 2019 from PSP Capital and Erie Street Capital. It has yet to make an acquisition. Known was formed in 2020, following the merger of data science specialist Schireson with creative and brand strategy agencies Stun Creative and Blackbird. In 2019, Schireson took investment from Intermediate Capital Group to help facilitate its growth strategy.
Sectors to watch
Data is still a largely nascent market, and one that can mean different things to different groups. Activity around data has been largely platform and technology-focused at around 85% of deals.
Key sector dynamics include the large walled gardens of Amazon, Google, Apple and Facebook, and the resulting anti-competitive impact around identity. This creates big winners such as InfoSum, and losers such as former ad-tech poster child Criteo. The future is how publishers leverage their audience and data to drive and diversify their revenue proposition.
We can expect to see a continued interest in data across all CMO and CTO service industries, with management consultancies leading the charge, particularly around advanced analytics, automation and digital transformation.
Meanwhile, after a period of significant investment in performance marketing, brands are asking how to link up with brand creative. Many will be looking to the new-era groups for the answer, and we’ve already seen movement in this direction: Carlyle-backed Dept’s acquisitions of Byte and Basic and S4 Capital’s acquisition of Decoded Advertising.
And let’s not forget ecommerce, with spectacular growth due to the pandemic and for the foreseeable future. Shoppable technology companies like Adimo are well-placed to help brands leverage their content assets and enable commerce directly through ads.
We’ll also see growth in personalisation technology plays that can operate without cookies, with companies such as PersonifyXP that solve the “cold start” problem and help ecommerce retailers drive better outcomes.
Back in vogue
DoubleVerify filed IPO documents in March, the latest in a number of ad-tech companies including Pubmatic, Taboola and Viant that have gone public since late 2020. Private equity money is also flowing into the sector, evidenced by Vista Equity Partners’ major investment in TripleLift.
Other areas to watch in adtech include attribution, a hot area for acquirers seeking to solve the acquisition challenge, and contextual, where we can find as many as a hundred companies solving identity challenges.
Expect the unexpected
One final trend will be deals that may not apparently compute at first sight. We’ve come to expect a certain rationale in the industry, but as models are upended and boundaries are redefined, the old certainties will be stretched beyond breaking point.
Look at Walmart’s acquisition of creative automation business Thunder: its first foray into ad tech, and probably not its last given its ongoing morphing into a technology business.
M&A conversations have been framed by reference to the global networks. Five years from now, M&A benchmarking will center around the exciting new groups that we’re watching reinvent the market in the first half of this decade.
