Why regulators’ scrutiny of Big Tech is rekindling buyers’ interest in ad tech 

Last year was a muted one for ad tech exits compared to the rampant activity of 2021, when the pop of champagne corks abounded with deal volume driven by initial public offerings plus mergers and acquisitions. 

Investment bank LUMA Partners’ 2022 Market Report shows the number of deals in the sector almost halved — from 90 to 56. Albeit, the wider digital media and marketing category actually increased by 2%, from 400 in 2021 to 406 in 2022.

The causes for this overall drop in the number of exits are well evidenced: a downbeat global economic outlook impacting overall ad spend, unprecedented M&A and public listings in 2021. 

Add to this how the decline in the valuation of those that debuted on the public markets the previous year (down 59% on average, according to LUMA Partners) led to a reduced appetite among potential suitors. Such dynamics meant that deals in the sector were either deferred or outright reconsidered. 


However, from the comparative low, there are dynamics starting to rekindle a potentially new flow of deals, namely the opportunities posed by the potential disruption of Big Tech.

Elsewhere, there is also the potential for taking ad tech companies on the public markets (many of which are priced significantly below their IPO prices). 

And for those publicly-traded ad tech companies that want to future-proof their Wall Street narratives, purchasing the right bit of tech can help to shore up their stock price.

According to Terence Kawaja, CEO of LUMA Partners, the ad tech sector is at the consolidation stage of its gestation. “Every industry goes through three phases of new company formation, maturity, and then rationalization and consolidation,” he told Digiday. 

“We are clearly in the third phase,” said Kawaja, adding that this period makes it a prime investment prospect for “later-stage financial investors,” particularly private equity. 

One recent example is Bridgepoint Development Capital — part of Bridgepoint Group, which took a majority stake in fellow ad tech company MiQ in late 2022 — taking a majority in France-based ad tech firm Equativ.

“In 2021, it was definitely a seller’s market, but now it is definitely a buyer’s market,” Arnaud Créput, CEO of Equativ, said, adding that many companies were valued based on revenues in 2021, whereas buyers are no more focused on appraising prospects’ EBITDA.

“But you see a lot of the companies that exited in 2021 struggle with those high evaluations, and that can become an issue for the development of a company,” added Créput.  

Opportunity in Big Tech’s difficulty

However, given ad tech’s recent history laden with examples of flameouts — and many more expected on the horizon, according to some experts — why are PE firms continuing to invest in the space? 

Several sources consulted by Digiday said the prospective breakup of Google — which many believe will divest of its ad tech assets under pressure from the Justice Department — is furthering the appetite of some investors. 

For Jean-Baptiste Salvin, a director at Bridgepoint who oversaw the fund’s investment in Equativ, the difficulties faced by the likes of Google and other Big Tech players at the hands of regulators is positive news for “the open internet.”

“We see breaches in the walled gardens … this is a complete part of my investment thesis. These guys [Big Tech] will still be dominant players, but they take 80% of budgets and only 30% of the eyeballs,” he added.

It’s the growing realization among advertisers that walled gardens receive more investment than their share of audience should warrant that has led many PE investors to double down on their ad tech investments in recent months, according to PE sources. 

One corporate development source, who declined to be named given their employer’s PR policies, told Digiday that a lot of PE firms that invested in ad tech will look to consolidate in the near- to mid-term, especially if there are potential bargains. 

“Private equity will have to do something with the assets on their sheets as they have to do something with them,” added the source.  

One recent example involves Simpli.fi — a demand-side platform with significant investment from PE firms Blackstone and GTCR — and its purchase of Bidtellect, a deal that was geared toward pairing their CTV and contextual advertising wares

The February purchase of Bidtellect furthered GTCR’s interests in the ad tech space — in mid-2022 its Dreamscape entity also invested in Standard Media Index — with the PE firm’s Stephen Master telling Digiday the more austere contemporary climate makes due diligence more straightforward.

“The thing is that you can actually see how management teams and companies handle adversity,” he said. “You don’t have to try to guess … in some ways, it makes it easier to evaluate, and sort winners and losers.”

Elsewhere, other potential buyers are eyeing potential opportunities in under-the-radar changes within Google’s operations — in particular how advertisers are handed off to a growing crop of “Google resellers” — with rumored buyer interest in this sector. 

For instance, the ongoing interest of Brandtech Group — a self-styled new-look holding group — in Google services specialist Jellyfish can be considered as one example of Google’s misfortunes spurring M&A. 

For Michael Seidler, CEO of investment firm Madison Alley, any such activity will be “relatively small” — in the range of $25 million to $150 million — particularly if acquisition targets are in the services sector of the industry. 

“On the tech side it’s a much different story because the valuations have really been radically impacted, and so I think there’ll be more consolidation among those that are low on cash need to combine to create scale,” Seidler said.


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