The Digital Media & Marketing ecosystem has continued to see a divergence in the first half of 2023 between a slow M&A environment and a strong public market relative to the technology sell off in 2022, as companies continue to manage through contradictory signals of broader macro headwinds and technology-driven tailwinds.

Financing remains expensive and less readily available to buyers as the Fed funds rate in Q2 2023 hit the highest level since August 2007 and regional banks recover from deposit risks in the wake of SVB’s collapse; both impacting funding for M&A deals as strategic and financial buyers continue to stay selective about how they deploy capital.

Regardless of these factors, companies in the Digital Media & Marketing ecosystem remain focused on operational efficiencies and navigating a path to profitability and predictability. Q2 2023 was a continuation of many companies in the LUMA.A and LUMA.M cohorts showing maturity in their ability to drive profitability while moderating growth, plus continued sectoral tailwinds related to streaming, commerce media, and AI create significant growth opportunities for the future.

M&A Activity Highlights

  • While the first half of 2023 remains sluggish from an M&A perspective, Q2 2023 was the third straight quarter of increased deal activity, slightly up from Q1 2023 despite a slowdown in scaled deal activity.
  • Private Equity buyers remain active across all sectors and are taking on smaller scale transactions.
  • While M&A volatility is expected to persist in the short-term, as interest rate changes begin to settle and companies continue to execute with profitability, strategic consolidation opportunities will increase as those with access to cash seek to expand their scale and capabilities.

Public Markets & LUMA Indices Highlights

  • Halfway through the year, both the LUMA.A and LUMA.M cohorts are off to an exceptionally strong 2023 with 27% and 15% year-to-date returns, respectively; far outpacing the ~50% declines at this time last year.
  • Relative benchmarks also performed well – the Nasdaq 100 index had one of its best first halves of the year ever, driven by several factors – explosive growth in AI capabilities, investor optimism for a pause in the Fed’s tightening policy, and easing concerns over inflation