‘Opportunity to build a lasting company’: As ad tech IPOs slow, M&A deals continue to chug along

By Seb Joseph

Just when you thought the ad tech boom would flame out from a super hot 2020/2021 IPO fest, dealmaking remains in rude health.

Look at the number of deals done in the last month.

Magnite bought Carbon. TripleLift snapped up 1plusX. Parsec was acquired by Kargo. Tatari swooped in for TheViewPoint. OpenWeb and Adyoulike. Not a week seems to go by at the moment without this alphabet soup of idiosyncratic ad tech names getting messier.

And it’s going to continue to do so for a while yet.

With a public market increasingly hostile to ad tech vendors and potential courters flush with cheap money, ad tech entrepreneurs are leaning toward selling up instead of IPOs. That’s easier said than done, of course. M&A activity in ad tech declined 25% in the first quarter of 2022 compared to the previous one, per investment bank LUMA Partners. Still, it’s unlikely this slowdown grinds to a halt anytime soon. On the contrary, deals look set to continue at a steady pace.

Not only have private equity investors raised money for the right deals, but recently minted public companies also have the balance sheets to make moves. And they’re both looking for similar targets: ad tech upstarts building for worst-case scenarios once third-party cookies go away for good.

These targets are, for all intents and purposes, potential lifelines for ad tech bosses — the ones that don’t want to be viewed as a slow-growth, legacy dumb pipe and have decided it would be well-served to expand vertically. Even so, these deals are usually far from transformative; they’re essentially tuck-in acquisitions, smaller, less attention-grabbing deals than so-called mega ones that are potentially more value accretive.

“We’re in the market to buy companies to support our organic growth,” said Joost Merks, group chief investment officer at gaming platform Azerion, which has concluded 50 acquisitions over the last seven years. “Everything we do supports that so we look at the geographies of companies as well as the gaps in our technological capability.”

TripleLift’s $150 million swoop for 1plusX is a case in point. It was done in the belief that any business that brings a genuine scalable solution to post-cookie targeting and measurement will thrive. Pitches like that are catnip to the likes of TripleLift — an ad tech vendor that has built a sizable media business on the back of fading third-party cookies. It’s not hard to see how a data management platform with the ability to help clients reach audiences using first-party data makes life without those cookies more palatable (and potentially profitable) for TripleLift.

“It’s unclear what will happen with the identity market, but what is clear is it isn’t a comprehensive solution for publishers and brands,” said TripleLift’s chief strategy officer Ari Lewine. “Companies like TripleLift and 1plusX are ID agnostic and support the identifiers customers want to use, but our focus is on building technology that allows the open web to be enriched with valuable, privacy-compliant data.”

Sound familiar? Magnite’s Adam Soroca, chief product officer …read more

Source:: Digiday