Adtech outfit Sizmek has confirmed that it has made 4% of its global headcount redundant following its recent $145m purchase of Rocket Fuel.
The cutbacks are part of Sizmek's integration of Rocket Fuel, an adtech company specializing in AI, with the job losses understood to have taken place across a number of markets, including the US and UK, affecting approximately 30 people.
In an emailed statement to The Drum, Sizmek chief executive, Mark Grether, explained that the cutbacks were prompted by the "inherent overlaps" which are encountered when bringing any two companies together.
He added: "As a result, we made an extremely difficult decision to slightly reduce our staff across various departments. We do not make these decisions lightly and I'm very grateful for these individuals’ contributions, however it was necessary to ensure the company is well-positioned for future profitable growth."
The statement went on to clarify that no further cutbacks are in the pipeline, adding that Sizmek has completed its "go-forward organizational design."
Grether added: "The new Sizmek makes us the largest independent buy-side platform in the world, providing agencies and advertisers with the ability to harness AI to enable data, execute media, and optimize creative — across the entire media plan.”
Sizmek recently unveiled its new leadership team with the roles occupied by employees from both sides of the newly unified pairing, with Grether asserting that the appointments were made to ensure the successful integration.
The company, which is backed by private equity firm Vector Capital, is attempting to position the newly-formed entity as an alternative to walled garden players such as Google and Facebook.
It also hopes to distinguish itself amid an “overcrowded Lumascape” by offering the industry “transparency and simplicity”, according to Grether, who recently told The Drum that Rocket Fuel's AI capabilities would be a particular unique selling proposition. “We’ll be the [tech-agnostic] decisioning layer, powered by AI, who sits on top of the DSPs and unifies the decisioning across the different programmatic outlets,” he added.
The initial announcement of the purchase – first proposed in July – was not without its detractors, with law firm Levi & Korsinsky conducting an investigation into the proposed deal. The legal firm claimed it was undertaking the investigation to determine whether or not the transaction was in the interests of existing Rocket Fuel shareholders. The takeover was subsequently approved and completed in September.
Both outfits were once publicly listed companies, but both have been cited as prime examples of Wall Street investors’ waning enthusiasm to invest in adtech stock, and the increasing willingness of private equity to extract value from their assets.
During a recent conference hosted by investment bank Luma Partners, arguably the foremost mergers and acquisitions advisers in adtech, Stephen Master, of GTCR explained some of the motivations behind the increasing interest of private equity groups in adtech.
The old world of opaque business practices where the emphasis was on selling impressions of questionable value, in the hope of generating profit via way of arbitrage, was difficult for private equity to invest in, he explained. Of particular interest is the ability to effectively rationalize infrastructure and operations to private equity investors such as Master.
"There’s a lot of companies out there with duplicative infrastructure, a lot of synergies to be had, and a lot of capacities to be built into larger businesses, plus a lot of value to be created that way,” he added.