Adtech fuels M&A deals in 2019 as holding companies hit the brakes

Marketing-sector acquisitions increased by 9% in 2019, reaching a total of 1,410 deals worth a total of $30.1bn – the highest level of activity for at least the past five years.

The number of these deals made with martech and adtech companies rose by 37% compared with 2018, according to a report from global M&A advisor Results International.

Almost a quarter of investment came from the private-equity sector last year, remaining consistent with 2018 levels, which had jumped by almost 94% from 2017. Of the 11 most active buyers last year, five were private equity.

Two-thirds of the private-equity deals in 2019 were within marketing services, where performance marketing businesses have proven attractive. Independent UK companies boosted by private equity included Jellyfish and Croud, which received investment from Fimalac and LDC respectively in November.

But it’s not just private equity buying into adtech. Brands, too, are investing to try to reclaim control of customer data and experience through investment in adtech companies, according to Paul Georges-Picot, partner at Results International.

McDonald's, Nike, PayPal and Walmart were all on the acquisition trail. Deals focused on improving the customer experience, with McDonald’s buying voice-recognition and artificial-intelligence specialists Apprente and Dynamic Yield to create personalised Drive-thru experiences and Nike acquiring Celect, a leading retail analytics company.

Walmart bought Polymorph, whose technology will allow it to target different segments of consumers, as well as AI specialist Aspectiva and assets of Triad Retail Media. PayPal made its largest deal to date, acquiring digital shopping and rewards platform Honey for $4bn.

"These behemoths have realised that they gave up a lot of their data to tech firms over the years and are now acquiring assets to enable them to take back ownership," Georges-Picot said. "This means investing in data collection and analytics, but also monetising that data."

However, the traditional holding companies scaled back their M&A activity. Dentsu once again topped the list of companies making the most acquisitions, but its total of 12 was far below the 34 it made in  2018.

WPP was second last year with 15 deals, but this year was not among the top 11 buyers (those that made at least six acquisitions). Neither was Omnicom, Interpublic or Publicis Groupe, despite the latter's acquisition of Epsilon in April being the third-biggest in the ad industry's history. These four holding companies made a combined total of just nine acquisitions.

Havas owner Vivendi did make the list of top buyers with six deals, as did Sir Martin Sorrell's S4 Capital, which made eight. Consultacy giant Accenture, meanwhile, was joint second, with 10 deals – one more than last year and half of the 20 completed by all consultancies.

Advertising and creative agencies was the most active M&A sector with 430 deals. Within that, full-service agencies was the number one sub-sector, with 237 deals, followed by performance marketing agencies, which saw 64 deals.

The second most active sector for the year was marketing and sales technology, totalling 227 deals, with marketing automation and customer data platforms the most active sub-sector at 135 deals. M&A deals for content businesses reached 82 in 2019 – more than double the 35 acquisitions made globally in 2018.

Results International partner Julie Langley said: "Marketing services continue to be of real interest to buyers, particularly companies that offer full transformation, that are able to execute faster and that focus on ROI.

"Technology continues to see an increase in deal activity as well, albeit in some cases coming from consolidation among historic assets. Companies taking advantage of the current trends, such as personalisation, measurement/analytics and the growth in demand for quality content (video content in particular) remain well-placed to attract investment.

"Beyond specific sectors, what we’re likely to see more of in 2020 is investors wanting results. The sector’s patience for companies unable to demonstrate profitability is wearing thin."