Adtech M&A Is Up, But With Fewer Buyers and Lower Valuations

After a deal drought in 2023, mergers and acquisitions in adtech are heating up. Adtech-focused investment bank Luma Partners said there were almost twice as many significant, scaled adtech transactions in the first half of 2024 compared to the first half of 2023, according to senior associate Michael DeMarseilles. More specific data isn't available until the end of the quarter. At venture capital firm Aperiam Ventures, deal flow has increased in the first half of 2024 compared to 2023, said general partner Eric Franchi. Private equity firm GTCR said the pipeline for technology deals (a broader category than adtech) is up 50%, according to managing director Stephen Master. Notable deals so far this year include data firm LiveRamp’s $200 million acquisition of clean room company Habu in January, Walmart’s $2.3 billion acquisition of TV maker Vizio in February and TV advertising company Cadent’s $324 million acquisition of performance marketing firm AdTheorent in April. But in June, the market shifted into higher gear. This month, four acquisitions have already occurred, including Equativ’s acquisition of fellow supply-side platform Sharethrough. In the past two weeks, ADWEEK has reported that SSPs 33Across and Sonobi and data firm Claritas have all hired bankers to explore sales. Driving this uptick in deal activity is the right-sizing of expectations after 2021’s very active adtech market and companies looking to create a more cohesive narrative by acquiring and shedding assets. But while adtech M&A is heating up, the market may not be fully healthy, with more stagnant companies looking to consolidate, sources said. Correcting 2021's inflated pricing 2021 was a landmark year for adtech. Many of the adtech companies that are public today had their initial public offerings in 2021, including DoubleVerify, Integral Ad Science, Taboola, Outbrain, AppLovin and ironSource. PubMatic debuted in December 2020. But some of 2021's fervor ended up overheated. DoubleVerify, IAS, Taboola and Outbrain all currently trade at lower prices than they debuted at. “The market allowed itself to go a little bit too crazy,” said Chris Cunningham, founder of C2 Ventures. “A lot of companies were raising top-of-the-market valuations that didn’t make sense.” Fast-forward to 2023 and M&A lay dormant, with companies worrying about a potential recession and employee cuts. By the time those fears were allayed later in the year, buyers and sellers had to get on the same page on prices. “When the market changes so rapidly, it takes at least six months to a year for both sides to agree on what the valuations should be,” said a banker source who requested anonymity to discuss ongoing deals. The source added that they are working with several clients in the market that are seeking lower valuations than they received in 2021 when they raised capital, even though those companies have grown. Acquiring and shedding to create a cohesive narrative Companies making acquisitions today are trying to add capabilities and lines of business, Master said, noting that 2024 adtech buyers are more likely to be other adtech firms than private equity firms or other investors. Master gave the example of TV company Madhive buying workflow software Frequence earlier this month to add workflow and omnichannel capabilities. “I’ve got to improve my company for the next company to care about it,” Master said, explaining how acquisitive companies want to increase their fortunes for when they eventually sell themselves. Adtech firms are not only buying companies to create a more attractive narrative, but also shedding less logical assets to appear more attractive to future investors if they want to sell themselves in 2025 or beyond, since the future M&A market will likely be less hospitable to adtech than 2021, Master said. “Very large companies ... are trying to slim down their portfolio to focus on the most valuable pieces and get rid of stuff that makes the story more complicated,” Master said, noting that several divestitures are in the market right now. These sellers are more likely to accept lower prices to finish deals quickly, Master added. Fewer buyers and lackluster sellers The strategic motives for 2024 deals contrast with 2021, when many private equity firms were looking to invest in adtech for the first time. “The industry is not going to have this influx of new buyers,” Master said. Also missing from the buyer pool are the biggest advertising companies: Meta, Google and Amazon are under antitrust scrutiny from the federal government and are reluctant to make deals, said Terence Kawaja, CEO of Luma Partners. This lack of new, deep-pocketed buyers coincides with an influx of lackluster sellers, Cunningham said. “The deals that you see are very unattractive, unglamorous,” Cunningham said, noting that he believes M&A activity will be more active in 2025. “It’s more so a quiet consolidation activity: companies that are running out of money and don’t have product-market fit.” Take June's spate of activity: Investor confidence and endless liquidity propped up more companies than the market could take, Cunningham said. Publishers and buyers have been complaining for more than one year about a glut of SSPs. But the current M&A market players are not all duds. Kawaja noted that Vizio-Walmart and LiveRamp-Habu are significant expansion deals: firms breaking into new categories versus simply consolidating. Still, today's ramped-up M&A market is not 2021. “Part of this is cleanup,” Kawaja said.

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Adtech M&A Is Up, But With Fewer Buyers and Lower Valuations

Deals are returning but they're not as frothy as they were during the financial bonanza of 2021

Catherine Perloff

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Catherine Perloff