Scaled advert tech M&A was up 150% within the third quarter, pushed partly by personal fairness … so, hurrah?
(For reference, scaled advert tech deal quantity was down 60% quarter over quarter in Q2.)
“I wouldn’t learn an excessive amount of into this, really,” stated Conor McKenna, a director at LUMA Companions, which launched its Q3 market report in early October.
The rise in M&A in the course of the earlier quarter is partially the results of a backlog from the primary half of this yr. As a result of there wasn’t a contemporary calamity throughout Q3, some firms with offers within the pipeline determined the state of affairs was steady sufficient to lastly pull the set off.
The warfare in Ukraine, common geopolitical instability, recessionary fears and rising inflation – none of these uncertainties have gone away.
What’s modified is that buyers and dealmakers are “getting used to it” by now, McKenna stated.
“After two quarters of coping with these exogenous elements, persons are getting comfy sufficient to say, ‘Okay, I do know what we’re coping with now, I perceive what’s occurring,’” he stated. “The state of affairs isn’t actually going to vary, so we noticed some firms go after sure alternatives in Q3 moderately than persevering with to attend.”
Taking inventory
We’d additionally begin to see some public advert tech firms get taken personal in quarters to return based mostly on how market situations are trending.
Though tech shares are down general, advert tech inventory values are starting to development nearer to their SaaS-y (as in martech) cousins. Martech shares have traditionally traded at greater multiples than different tech shares as a result of SaaS is related to extra steady, recurring income.
However now, programmatic platforms are maturing and getting valued nearer to SaaS companies, McKenna stated.
Advert tech valuations are additionally stabilizing after what have been arguably unjustifiably excessive valuations over the previous couple of years when greater than 20 advert tech and martech firms went public.
“After we hit November of this yr, and each subsequent quarter after that, we’ll be in additional steady occasions, at the least by way of the place these valuations are,” McKenna stated. “After which I feel we’ll begin to see extra consolidation amongst public firms.”
The pie
Wanting on the tea leaves and predicting an uptick in consolidation is maybe an unsurprising viewpoint for an funding banker. It’s additionally a bit of sanguine contemplating the financial local weather.
However even when there’s a downturn that causes advertisers to tug again their spend, McKenna stated, he predicts advert tech and martech firms received’t fall off a cliff.
“There’s at all times the chance that externalities negatively impression the sector, and there are a variety of challenges coming within the quick time period,” he stated. “However there are additionally longer-term developments that accrue in the direction of promoting know-how and advertising know-how.”
For instance, though advert spend will lower throughout a recession, “individuals can even have to see efficiency and so they’ll wish to know precisely what’s occurring with their advert spend,” McKenna stated.
“Even when the general pie shrinks,” he stated, “particular components of the pie can nonetheless proceed to develop.”
