Global marketing and tech M&A fell 19% by volume and 50% by value in 2020: Ciesco

There was a 19% drop in M&A transactions worldwide in 2020 in marketing, digital media, traditional media and martech, according to advisory firm Ciesco. The firm reported 1,091 M&A transactions in 2020, with announced deal values of $55.9 billion, a 50% decline in value over the previous year. This data corroborates a Campaign year-in-review feature on the state of M&A in the marcomms industry. 

Digital media, traditional media and martech were the most popular sectors for deal-making, collectively representing over half of all deal volume in 2020. As companies preserved cash during a pandemic year, big ticket deals of over $1 billion took a back seat, with only 13 such transactions in 2020, compared to 28 in 2019, Ciesco reported.

The report found that holding networks went into cash preservation mode in 2020, with only 15 deals completed in the year a 42% decline from 2019's total of 26 transactions. This number is a sharp decline from the 52 deals struck in 2018 and far removed from the 96 inked in 2016. Dentsu was the most acquisitive network in 2020, followed by WPP.

The company's report, titled 'Technology, Digital Media and Marketing 2020 Global M&A Review and 2021 Outlook', was compiled with law firm Bird&Bird and deal tracker Pitchbook. 

Global holding networks spent much of 2020 restructuring their operations in the face of declining revenues and took the opportunity to divest under-performing legacy assets. Stripped of this flab, Ciesco sees an opportunity for M&A to strengthen data, tech and ecommerce capabilities in 2021.   

"The total number of deals in APAC was 75, a 39% rise on the previous year," Chris Sahota, CEO of Ciesco, told Campaign Asia-Pacific. "China, Australia and India accounted, respectively, for 18, 17 and 16 deals. Hong Kong and Singapore accounted for five; together, these five regions account for 90% of total deal volume in APAC."

In China, half the deals were in the digital media space. Examples include Alibaba Pictures’ acquisition of a majority share in Yinhekuyu, a variety-show maker, for $56 million, and Baidu’s $3.6 billion acquisition of JOYY’s live streaming platform YY Live in an all-cash transaction. Of the other markets in APAC, Australia showed an increase of 20%, whilst the remaining markets showed a similar level of activity to 2019. Most of the target companies in Australia were in agency services and media publishing.

In terms of geographies, The US and UK remain the most active markets, with 500 and 143 deals, respectively, followed by France, Canada and Germany and The Netherlands. These markets accounted for over three-quarters of all M&A deal flow. However, while Western Europe saw a small decline in the pace of deal-making, Canada's fall more sharply, the report noted. 

As companies and networks carefully plot their M&A strategy in a volatile market, they are focusing on specific niches for inorganic growth. "The report demonstrates the attractiveness of data- and technology-driven business models to financial investors," Sahota added. "Through last year’s turbulence, businesses are learning to adapt and future-proof their operations. We expect continued strong interest in the APAC region throughout 2021 from both strategic and financial investors.”

One segment that is seeing growing interest, according to the report, is mid-market marketing services networks and companies. "Data, platforms and digital experiences, advanced analytics and speed are now the global foundation for modern marketing," the report notes. "This has led advertisers to rethink their operating models, approach to tech and role within the marketing value chain."

As these changes in thinking have rolled out, smaller agencies such as Japan's Hakuhodo have used this as an opportunity to strike some deals. Hakuhodo made five majority deals and one minority deal in 2020, the report noted, including its first transaction in India, Adglobal 360. Other companies including Bauer Media, The Stagwell Group, Carlyle-backed Dept and Next 15 were also busy making deals. 

The Private Equity market showed the greatest buoyancy. PE deals in tech, digital, media and marketing represented 37% of all M&A activity in 2020. This was down from 42% in 2019, but notably higher than 13% in 2017. Consultancies, tech companies and holding companies contributed to a diverse buyer universe, joining private equity among the top 10 acquirers.

Ecommerce is predicted to drive retail this year and special-purpose acquisition companies, which totaled $80 billion in fundraising last year, are forecast to drive fundraising in 2021.