M&A diversifies outside of adtech as regional presence takes priority

R3's analysis of 489 M&A deals in found some notable shifts in buying patterns from 2018 to 2019.

Buyers in the marketing services M&A space have diversified their acquisitions in the face of geopolitical uncertainty, according to independent consulting firm R3.

"Buyers have been looking at investments that will strengthen their position in an uncertain geopolitical climate," said Greg Paull, principal at R3, explaing how the M&A landscape has shifted in 2019. "Though martech and adtech have driven M&A value, there has been more interest in acquisitions that will increase regional presence and serviceability."

The types of target companies acquired shifted quite notably in 2019 with traditional martech/adtech transaction values falling from $14.6 billion in 2018 to $10.9 billion in 2019, although the category was by far still the most favored by buyers. 

"Though buyers favored martech and adtech companies in 2019, diversity was notably present in the type of acquisitions made. Experiencing the most growth were production houses and shopper/CRM/promotion companies, which saw double-digit upticks in both number of transactions and value," reads part of the report.  

Digital design and production, creative and digital full service, experiential, social media and media specialist, branding and B2B companies all saw lowered spend in 2019 compared with 2018. 

On the buyer side of the equation, unconventional buyers, defined as a company that doesn’t belong to any other category, i.e.: media & entertainment companies, telecommunications companies, etc, had dropped their investment in marketing services M&A from $7.8 billion to $3.7 billion from 2018 to 2019, supplanted in the top spot by private equity-backed firms which increased their spend from $4.5 billion to $6.6 billion during the same period.

Agency holding groups were the second-biggest spenders on the list, having increased their contribution to $6.5 billion- although R3 noted that the number of holding company M&A transactions fell by nearly half year on year.  

According to R3, overall spend on marketing services M&A cooled off as well, to the tune of a decline of 15 percent to a total of $27.7 billion from 2018 to 2019 as companies sought to diversify their investments beyond marketing tech. 

This decline came after a 144 percent spike in M&A spend from 2017 to 2018. 

North America saw the highest number of transactions in 2019 at 276, with EMEA second with a total of 143 transactions during the period.

China’s M&A landscape experienced its weakest year in the past decade, with deal activity in marketing services decreasing by 54 percent, due to trade tensions and increased regulatory scrutiny negatively impacting the appetite for outbound investment in the region. 

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