This article was originally published December 24.
The advertising M&A market was tepid this year amid an ad spending downturn, soaring borrowing costs, and prolonged uncertainty about the economy.
But many industry experts predict dealflow will return once again in 2024. Some of the consolidation is likely to be driven by necessity for some players who struggled their way through the past 12 months .
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“After a slow 2023, I expect to see an overall increase in M&A activity next year driven by the ongoing lack of funding options for smaller, sub-scale, and unprofitable businesses,” said Paulina Klimenko, chief growth officer at PubMatic.
But other areas are set to be driven by more buoyant trends. Ad industry groups predict global ad spend will grow between 4% and 7% in 2024, boosted by US political ad spending and global sporting events like the Olympics. The rise of nascent trends like AI, connected-TV, and retail media could also fuel acquisitions by strategic buyers.
Plus, 2024 is set to be the year that the world’s most popular web browser, Google’s Chrome, turns off third-party cookies causing a targeting and measurement signal loss that may force many industry players to bolt on new technologies.
Business Insider polled experts across the advertising industry — from consultants, to bankers, to analysts, investors, and adtech leaders — who named the companies likely to be active in the advertising M&A market in 2024. The companies listed didn’t provide comments, unless otherwise stated.
1. Accenture
Europe’s tightening regulations — particularly around data privacy and training AI models — are going to make it increasingly difficult for big tech platforms to access data and target ads. But it’s an area where consultancies can take advantage, according to Tom Henriksson, general partner at venture capital firm OpenOcean.
“Consultancies have an opportunity to address gaps in clients’ martech stacks via adtech acquisitions,” Henriksson said.
Both Henriksson and Chris Sahota, CEO of M&A advisory firm Ciesco, highlighted Accenture as a likely active acquirer of advertising businesses next year. Accenture has acquired scores of advertising businesses over the past few years, including Droga5 and the Japanese marketing firm SIGNAL.
Sahota noted that Accenture has said it plans to invest $3 billion in AI tech over the next three years and double its AI workforce to 80,000 through a mix of hiring, acquisitions, and training.
2. Amazon
With Amazon’s advertising business again expected to post double-digit growth for the 2023 financial year, Javier Rodriguez Horta, global marketing strategy practice lead at CvE, a marketing consulting firm, said Amazon may look to complement its existing ad business by acquiring startups that specialize in data and analytics, retail technology, or logistics.
Chris Sahota of Ciesco noted that while Amazon hasn’t made a significant advertising acquisition in a number of years , it now might look at AI-driven solutions complementary to its recently announced generative AI image generator . For example, it could look at technology that could quickly generate background images so brands can place their products in more of a lifestyle context, he said.
3. DoubleVerify
Ad verification and performance firm DoubleVerify had a strong 2023, anticipating full-year growth of around 27% at the midpoint. It also enhanced its offering with its $125 million acquisition of the AI-powered adtech firm Scibids this summer.
It’s poised to make further acquisitions. DoubleVerify’s stock price is up more than 60% in the year to date, the company has more than $250 million in cash and cash equivalents on the balance sheet, and no long-term debt.
Andrew Buckman, vice president of marketing and investor relations at the digital ad platform Azerion, noted that DoubleVerify has announced lots of strategic partnerships in the past year “which are good precursors to investments and acquisitions.”
4. Havas
Havas has maintained a steady acquisition rate over the past few years and the French agency group was the top strategic buyer in 2022, according to Ciesco.
Its parent company Vivendi recently announced that it would explore splitting out several of its business units including Havas, broadcaster Canal+, and the publishing and distribution group Lagardère.
Havas is already experiencing strong international growth and in order to maximize its development potential, Vivendi will likely explore listing the agency group as a separate public company.
“Anticipating their acquisition momentum, we expect their buying activities to continue in 2024,” Sahota said about Havas.
As for what types of companies Havas might opt for, Marc Goldberg, CEO of the consulting firm Stages Collective, said that advertising holding companies may look to buy contextual advertising solutions. These solutions could supplement their legacy data acquisitions, or it could help them develop tools that identify people online without cookies.
5. Match Group
Dan Salmon, partner at New Street Research, thinks Match Group could be “a dark horse candidate” to acquire adtech assets in 2024. Advertising isn’t new to dating apps, but with paid-user growth sluggish post-COVID, dating companies could look to broaden their ad offerings next year to further diversify their revenue.
“While organic development and partnerships are the most likely path, online dating companies could accelerate advertising product development through small tuck-in acquisitions of mobile ad tech,” said Salmon. “With strong free cash flow generation, a company like Match has plenty of dry powder to execute transactions.”
Match CEO Bernard Kim said at the New Street Research Online Dating Summit in March that “advertising should be an important business for us, but it will take some time to get there.” He added that it could grow to a $100 million business over time, from around $50 million currently. A targeted acquisition could supercharge that growth.
6. Nexxen
Nexxen, rebranded from Tremor International Group this year, is a company built via acquisitions, having bought TV ad platform Spearad and the video adtech firm Unruly in recent years. It also completed its acquisition of the demand-side platform Amobee in 2022.
Andrew Buckman of Azerion noted that the company has almost $200 million in cash and cash equivalents on its balance sheet and has recently bought back a lot of shares, which could signal an appetite for acquisitions in 2024.
Nexxen said in its latest financial statement that it expects to use its cash resources for future potential strategic investments, initiatives, and acquisitions “over the intermediate- and long-term.”
7. Private equity
With ad spend expected to recover in 2024, PubMatic’s Klimenko said it’s likely private equity funds will take a renewed interest in adtech companies.
Providence Equity Partners, Waterland, and KKR were the most active PE acquirers in the ad space between 2022 and 2023, according to Ciesco. Other notable deals last year included One Equity Partners acquiring creative and tech group MSQ Partners, which is now planning further international expansion. Elsewhere PE firm Novacap acquired TV ad tech company Cadent in a $600 million deal. Cadent now plans an acquisition spree to bolster the platform’s growth, the company’s CEO Nick Troiano told Business Insider this August. Over in Europe, Bridgepoint took a majority stake in French adtech firm Equativ .
“Private equity have developed a keen interest in this sector over the last couple of years driven by the businesses in the sector proving to be scalable, profitable, flexible and cost-effective,” said Chris Sahota of Ciesco.
8. The Trade Desk
As the advertising industry prepares for the death of cookies, The Trade Desk “will consider acquiring companies that help reinforce their identity play,” said Marc Goldberg, CEO of the consulting firm Stages Collective.
The Trade Desk already has its Unified ID 2.0 solution that helps marketers target and measure without cookies, but it could look to bolster it with an identity specialist that needs the scale of an advertiser client base like that of The Trade Desk in order to succeed, according to Goldberg.
Last year, industry insiders speculated that The Trade Desk could acquire fellow adtech firm Criteo, but a deal never materialized. The company has around $1 billion in cash and cash equivalents on hand — more than enough to deploy into a meaningful acquisition.
9. Walmart
The experts at venture capital firm OpenOcean expect retail ad media to be the strongest market for growth in 2024. Already, Walmart has almost doubled its ad business in two years, adding new measurement partnerships and recently expanding its in-store ad network.
A recent Bain & Company survey of hundreds of US advertising decision makers found that 50% of respondents expect to consolidate their spending with fewer retail media networks , with large and established players like Walmart expected to take advantage of this consolidation.
However, bridging the retail media scale gap with Amazon will be an uphill battle without targeted acquisitions, said Tom Henriksson, OpenOcean general partner.
“Expect Walmart to be an aggressive industry consolidator, making strategic acquisitions in 2024 to obtain the ad tech capabilities it requires to continue growing its retail media business,” Henriksson said.
Source: www.businessinsider.com
