Q2 2022 Market Report

Q2 2022 Market Report Round-Up

Amidst the worst H1 in 52 years for the S&P, the Digital Media and Marketing ecosystem has not been immune to the exogenous factors plaguing the broader economy. Ongoing inflation, rising interest rates, the continued conflict in Europe, and the threat of a recession at home have put pressure on public equities and raised market uncertainty, which is the biggest inhibitor of deal-making. Despite external challenges, the business fundamentals and underlying ecosystem trends in the Ad Tech, MarTech and Digital Content verticals remain strong.

While Q2 deal volume was flat relative to Q1, this was largely propped up by Digital. Content and the continued deal-making in the Gaming space therein. Excluding Digital Content, Q2 M&A activity is down 21% QoQ and down 24% YoY. Scaled deal activity (>$100mm) has continued to slide. Scaled Ad Tech deal volume is down 60% QoQ, and scaled MarTech deal volume is down 50% QoQ.

That said, financial sponsor activity has continued to grow in significance. Companies in our coverage area have continued to raise money, and Private Equity–backed firms in the space are comprising an increasing share of overall deal count.

In 2021, we saw a near doubling of the Ad Tech & MarTech public cohort (as tracked within the LUMA Indices). At the start of 2022, we noted a significant pipeline that is ready to go public. None have pulled the trigger thus far, but the pipeline remains. As for the cohort that is already in our Indices, we’ve seen a “reversion to the mean.” 2021 was a blockbuster year, so any performance relative to all-time highs will represent a decline. LUMA.A and LUMA.M are both down ~50% YTD, though Ad Tech still remains meaningfully elevated relative to pre-pandemic levels.

Key Q2 Takeaways

▪ Digital Media and Marketing managed another quarter of deal activity, though this was largely propped up by Digital Content (Gaming) transactions.
▪ In the public markets, both Ad Tech and MarTech saw meaningful declines in Enterprise Values and valuation multiples — driven largely by exogenous factors
such as inflation, rate hikes, and geopolitical tensions.
▪ Scaled deal activity (>$100mm) saw a sharp decline QoQ in Ad Tech and MarTech, contracting 60% and 50% respectively.
▪ Growth Equity / Late-Stage VC investors continued to play a pivotal role in providing large rounds of financings for more mature companies in the subsectors on their road to becoming public.