LUMA Digital Brief 028 — Market Report Q2 2020

LUMA’s latest Market Report covers the public and private markets during Q2 2020. As the COVID-19 pandemic continues to impact capital markets and the global economy, Q2 2020 was a challenging quarter for M&A. Deal activity was down across the board, with Ad Tech and MarTech deal volume down approximately 70% relative to Q2 2019. Since slowing to a crawl in March of this year, deal making has yet to return to pre-COVID levels, as buyers across the Media/Marketing ecosystem have not yet shown a consistent appetite for deals, particularly at scaled valuations. The few bright spots were in Digital Content and D2C, which each saw several scaled transactions across a variety of sub-sectors.

In the public markets, we witnessed the impact of unprecedented fiscal and monetary policy undertaken by the U.S. Federal Government and Federal Reserve, respectively. In stark contrast to the historic stock market decline during February and March of this year, U.S. equity markets have since rallied to levels approaching (in some cases, exceeding) their “Pre-COVID” highs. Within the Media/Marketing ecosystem specifically, market performance has varied dramatically. Generally, the market has rewarded “tech-centric” businesses with stable or increased valuations and multiples, while companies better described as having “legacy” business models (e.g., TV/Media, Telcos, Agencies) have lost significant value.

Despite the challenges of the past two quarters, we’re optimistic about the future as consumer trends continue to push towards digital channels, confidence increases in the public markets, and strategic dialogues regarding M&A return.

Highlights of the quarter include:

  • Continued consolidation of the location data industry via two private-to-private mergers
  • AppLovin’s acquisition of Machine Zone for a reported $500MM and Facebook’s acquisition of GIPHY for $400MM, among other Digital Content deals
  • The sale of Mirror, a D2C home-fitness technology company, to Lululemon for $500MM
  • The impact of the COVID-19 market sell-off and subsequent stimulus on the Media/Marketing ecosystem’s equity market performance and revenue multiples
  • The IPO’s of MarTech companies ZoomInfo and Dun & Bradstreet
  • A range of notable financings rounds across Ad Tech, MarTech, Digital Content, and D2C