The global market for marcoms, adtech and martech looked rather different at the start of this year, compared to the first quarter of 2014. Of all global deals done in Q1 2015 84 per cent were by companies that made just the one acquisition, compared to 75 per cent for 2014 as a whole, reflecting a raft of new entrants into the global acquisitions market – an exciting development.
In the marketing and communications sector, Dentsu Aegis Group was the most prolific buyer in Q1 2015, with 4 per cent of all deals.However, in the first quarter of the year we also saw acquisitions from less well-known buyers such as Paperhat Group, a UK based marcoms company specialising in creative, consulting and procurement, and MCI, a Swiss events company that acquired three other events companies.
Notably, Jan-Mar 2015 is the first quarter that WPP has not topped the most prolific buyer list since that Q1 last year. However, it looks as though its efforts this quarter have been to focus on the adtech space as WPP accounted for 4 per cent of all adtech & martechdeals in Q1 including the acquisitions of ActionX and comScore.
Private equity interest in the sectors still remains strong, accounting for 7 per cent of all deals done. However, this is a lower percentagethan in previous years as the valuations and deal structures emerging from the strategic buyers are proving too competitive for many private equity investors.
There were a total of 316 transactions across the three sectors in Jan-Mar 2015, compared to 386 in Jan-Mar 2014. Although the number of M&A deals dropped in Q1 2015, this isn’t something to be worried about as it often has a lot to do with companies pushing for deals to be completed pre or post December due to financial reporting. Similarly, total deal value should be looked at with caution, as these figures are simply due to the number of companies disclosing value, as opposed to an indication of average deal size.
The most active sectors this past quarter were full-service digital and mobile, with branding also seeing a big jump in interest since 2014. In addition, around a third of the deals done in Q1 2015 were cross-border with the most active sector for cross border deals being sports marketing and healthcare communications, with over 60 per cent of buyers coming from overseas.
Meanwhile advertising platforms comprised a third of all global M&A deals done in the adtech sector in the first quarter of 2015, a 4 per cent increase on 2014. However, marketing automation businesses saw an even bigger jump, from 8 per cent of the market in Q1 2014 to 20 per cent this year.
Geographically, North America remained the most active location for adtech transactions with 57 per cent of all deals, although this was down from 66 per cent in Q1 2014. APAC and Western Europe saw their share of deal activity increase by 5 per cent each from Q1 2014 to Q1 2015.
What are our predictions for the rest of the 2015? In areas such as digital and mobile, M&A is seen as a cost-effective and straightforward way to get the expertise agencies need. With the rise of consumer power, the need for data is at its highest and agencies that can create relevant content on multiple platforms will be top targets as buyers continue to value hard-to-find revenue growth and capability they don’t currently have.
As the market becomes more and more fragmented, acquisitions of ad platforms will continue to dominate due to a desire forbetter digital advertising technology among both the big networks and smaller players. Emerging players in ecommerce and social media platforms will continue to invest in the sector to help monetise their growth, and the big players such as Google, Facebook and Twitter will continue to make moves into mobile and video to consolidate the market. On top of all this, the IPO market is buoyant once again, meaning there will be some well funded new potential buyers coming into the market in the months to come.
Julia Crawley-Boevey is a director of Results International