Video ad tech firms Connatix and JW Player are holding merger talks

Connatix and JW Player are poised to strike a deal that will effectively amount to a merger of the two companies, according to sources, as the much-anticipated wave of mergers and acquisitions in ad tech gathers pace.

The private equity firm with a controlling stake in Connatix, Court Square Capital Partners, is understood to be the main source of funding for the deal — Digiday was unable to establish a proposed valuation for JW Player — albeit any proposed transaction is likely to be publicly framed as a merger.

Separate sources familiar with the developments told Digiday that senior executives from both Connatix and JW Player are understood to have met in recent weeks to decide upon operational efficiencies, such as corporate branding, and how best to harmonize their business offerings.

Spokespeople representing both Connatix and Court Square Capital declined to comment, while Digiday’s attempts to contact JW Player were not responded to by press time. And while no definitive agreement has been reached, two separate sources said the announcement of such a transaction is expected imminently. 

Connatix and JW Player specialize in video monetization, and both parties benefitted from the renewed wave of PE interest in the online media sector that occurred amid the “digital acceleration” of all industries during the COVID-19 pandemic. 

According to an announcement at the time, Court Square Partners announced a “significant investment” in Connatix in mid-2021 – the transaction is understood to have valued the ad tech firm at north of $500 million – to help fuel its growth through M&A moves.

Meanwhile, JW Player raised $100 million in Series E funding from LLR Partners during the same period and has since made M&A moves of its own with the 2023 purchase of InPlayer building on its May 2021 purchase of VUALTO.  

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However, growth rates across the industry as a whole have since stagnated, if not declined, with the proposed merger of the two companies geared toward restoring their fortunes to the pomp of 2021, given the potential synergies. 

For example, JW Player offers a SaaS-based video player (it also generates revenue from ad sales) and has relationships with sophisticated media owners, particularly broadcasters. Meanwhile, Connatix, which has a supply-side platform, is understood to have more direct integrations with buy-side parties.

The pair’s union would take place amid a flurry of expected M&A moves in the ad tech space. Sources anticipate more deals by the close of the year and into 2025, even amid lingering uncertainties such as the fate of third-party cookies, among other concerns.

For instance, the cost of borrowing money has been a significant factor in stalling the flow of deals in the sector over the past two years for obvious reasons, but an anticipated dip in interest rates is expected to help encourage buyers.

Meanwhile, political developments will also play a role, especially considering the uncertain future of figures like the Federal Trade Commission’s Lina Khan, should Republican candidate Donald Trump win the U.S. presidential race.

In their second-quarter analysis, advisory firm WY Partners noted that PE buyers had their most active quarter since Q2 2023, with 149 deals in the overall media sector, a 55% increase from Q1 2024. 

Speaking with Digiday in late June, Terence Kawaja, CEO of LUMA Partners, an investment bank that specializes in ad tech, backed the notion of an increase in M&A in the sector in the second half of the year. 

He pointed to the recent union of Equative and Sharethrough (two SSPs) as indicative of the “rationalization/consolidation deals” that are likely to proliferate as M&A in the sector increases. Among the other anticipated deals in the space is the proposed union of Outbrain and Teads, a deal that is expected to close in the coming weeks.

“You get the normal type of strategic M&A that LUMA is known for,” Kawaja said, “and then you get the rationalization/consolidation deals; they’re not bad; I call that a necessary clean-up, we’re better off having those deals.” 

https://digiday.com/?p=551159

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