The first quarter of 2016 was the joint third-highest for ad tech deal activity on record, according to a new report.
Specialist M&A advisor Results International reveals that 108 deals were made in Q1 of this year, 75 in martech and 33 in ad tech - for a total value of $2.4 billion. This was, however, a decrease from $3.1 billion in Q4 last year.
The report defines martech as a solution supporting companies operating on a traditional enterprise model. It offers software to the sales and marketing function, be it analytics, customer engagement or marketing automation. It tends to charge for long-term licenses on a software-as-a-service (SaaS) subscription model.
Ad tech, on the other hand, facilitates digital ad space buying and selling. Traditionally, ad tech vendors operate on a transactional revenue model connected to media investment and campaign performance.
Competing for ownership
Software powerhouses and agencies drove M&A in the first quarter, according to Results International, with regular acquirers Dentsu and Rakuten, and four other companies involved in two or more deals.
The pace was kept up this quarter too and agencies such as Dentsu and Publicis made a number of transactions. The only surprise noted by the report’s author was WPP, a serial acquirer which, having made 10 purchases in the last quarter in 2015, restrained from deals in Q1.
Julie Langley, partner at Results International, said there was a trend in “agencies, IT services companies, enterprise software vendors, telcos and media groups” competing for ownership of the ad tech and martech space with their recent buys.
With ad tech and martech getting more attention within private equity, there was an increase from 7% in 2015 to 9% in Q1 this year. Direct investments and private equity backed companies, such as SSI, Mediaocean and Internet Brands, were the major acquirers.
Q1’s biggest transaction came from two leading Chinese Internet firms supported by Golden Brick and Silk Road fund. The companies paid $1.2 billion for mobile-led ad tech platform Opera. Not only was the acquisition the largest in the quarter, it was also an important investment into Europe.
The big bucks
Q1 saw a number of major deals, such as a $360 million buy of US vendor Tapad by new European acquirer Telenor, but also the Time Inc.’s purchase of Viant, $26 million spent on Juice Mobile by Yellow Pages and Internet Brands’ acquisition of Demandforce.
Adding up to 38% of all deals completed and a growth of 10% from the previous quarter, there were another 40 cross-border deals.
“The performance of ad tech stocks in the public markets has improved for the second consecutive quarter, we’ve seen a sustained, strong, volume of ad tech and martech deals completed globally and exciting new buyers continue to emerge in the space. When we couple this with the healthy multiples paid for Tapad and certain other acquisitions, it’s been a very encouraging start to the year,” concluded Langley.