After what seemed like a quiet period on the M&A front, ad tech companies appear to be back up for grabs. August alone has seen tie-ups between Outbrain and Teads, and Adelaide Metrics and Rita, as the summer months thaw out a cold snap in the M&A market.
Terry Kawaja, Founder and CEO of LUMA Partners, a strategic advisory firm, says M&A activity went through “a decade-long low” in 2023, citing economic uncertainty as a major cause for the standstill. High interest rates, global wars and recessionary fears loomed over the economy, prompting ad tech companies to cut costs last year.
“In 2023 nearly all the companies in the sector got the memo on efficiency and cut costs dramatically,” says Kawaja. He notes that the EBITDA margin of public ad tech companies rose by an average 7 percent between H2 2022 and H2 2023. This made them more sustainable acquisition targets, which combined with a freer flow of capital, reignited M&A activity in 2024.
Speaking with Digiday in mid-June, Terence Kawaja, LUMA Partners’ CEO, noted that any subsequent dealmaking activity in the remainder of 2024 will likely fall into two categories: rationalization (or consolidation) deals and strategic expansion deals.
“There’s strategic deals where someone is acquiring another geography [market] or another technology … and they tend to be higher multiple deals,” he said. “Then there’s consolidation deals, you don’t tend to see groundbreaking valuation multiples there.”
Article: VideoWeek
Read the entire article: VideoWeek
