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Last year saw a boom in mergers and acquisitions – an impressive 139% increase in the U.S. compared to 2020. Deal volumes broke records with $ 5.8 trillion in mergers and acquisitions activities in 2021, driven primarily by digital transformation, access to capital, and a recovering global economy. and labor shortages. This “supercharged” merger and acquisition environment is likely to continue in the foreseeable future.
Not surprisingly, technology and telecommunications offerings accounted for nearly 20% of mergers and acquisitions activity last year, including more than $ 2,000-related media-related bids worth $ 189.7 billion. Significant major transactions included the acquisition of AppLovin from MoPub, the acquisition of Microsoft from both Xandr and Nuance, and the purchase of Integral Ad Science’s Publica Public Connected TV advertising platform, along with other multimillion-dollar offerings.
The evolving media landscape is creating new revenue opportunities, as evidenced by Amazon’s quarterly earnings at Walmart. Advertising is a major source of revenue and in some cases, like Meta, the source of challenges. These results, influenced by several converging factors, have laid the groundwork for an unprecedented M&A activity related to advertising in 2022.
The first catalyst for the planned consolidation of the media focuses on privacy regulations. Data is a valuable currency in advertising, as it allows advertisers to make effective transactions with specific audiences. Consumers today are increasingly aware of how their data is used, driving both regulation (such as the GDPR in Europe and the CCPA in California) and changes in business policy that offer informed options to consumers ( changes from Apple and Google to privacy on mobile devices, for example).
Related: What 2021 Merger and Acquisition Offers Tells Us About the Future of Online Advertising
Naturally, data regulation varies widely around the world, often creating barriers to operating in new markets. This unalterable fact is a powerful incentive for mergers and acquisitions, as it allows an organization, on the other hand, limited to expand its geographical footprint by acquiring a consolidated operation already adapted to the unique regulations of the region. In addition, the rapid rise in the value of own data will also fuel bids. That’s why we see retailers entering the advertising space at an unparalleled rate. Businesses with access to their own data can generate value through advertising, as Amazon’s latest distribution of earnings from its advertising revenue proved to be quite compelling.
Opportunities in this high-growth market are similarly influencing supply. The remarkably rapid growth of digital advertising (it now accounts for two-thirds of all advertising) is attracting new players to the space at a corresponding pace. Last year, we saw Walmart, Instacart, and Nordstrom expand their advertising operations, immediately leading to strong new revenue streams. While some organizations have partnered with advertising technology companies to drive revenue growth, others are turning to M&A. Simply put, acquisitions with strong high growth potential provide a proven way to increase revenue. Organizations with their own data can monetize this critical asset through acquisitions of advertising technology, as demonstrated by TransUnion with its $ 3.1 billion acquisition of Neustar.
The evolution of consumer behavior, that is, the fragmentation of devices, will also continue to affect consolidation. The pandemic clearly altered the way the public consumes content, with an increase in time spent on digital devices and the emergence of new streaming options. The diversity of access to current information creates complexity for both advertisers and publishers, as the desire to reach the public all channels — television, digital and mobile — make it difficult to manage technological strategies and solutions. The combination of operational processes to support omnichannel advertising is likely to drive further mergers and acquisitions of the media industry.
This catalyst is bolstered by growing expectations to deliver advertising through channels, influenced by both the needs of advertisers and the preference to establish relationships with vendors capable of simplifying the supply chain. In short, the supply chain of advertising technology is complex. To simplify, larger brands need to acquire one-off solutions to maximize their footprint across the digital supply chain. Media companies that focus on a specific vertical (i.e., connected TV / CTV) are more attractive acquisition targets for companies looking to enter the market, as evidenced by the recent $ 430 million acquisition. ‘AppLovin from the CTV software platform, Wurl. Younger players with a unique focus are mature targets and will likely dominate the takeover bids next year.
Related: After 7 mergers and acquisitions in 7 years, I thought I had seen it all. I then completed a merger and remote acquisition amid a global pandemic.
Strategic acquisitions also provide a means to achieve scale, which is becoming increasingly important in today’s marketplace, where advertisers are consolidating with fewer, larger and higher quality supply partners. Implementing sophisticated quality control measures is a costly endeavor, often requiring costs that smaller businesses cannot afford, such as money back guarantees, especially in emerging advertising formats. The growing trend of supply path optimization, or supply chain simplification, is forcing customers to work with fewer partners that offer quality, control, and efficiency. Stairs are an important part of this offering.
More than 10 public advertising technology companies are now valued at more than $ 1 billion, which includes the top tier of the industry. The desire and competitive benefits of more mature and scalable solutions for publishers and advertisers will continue to fuel media mergers and acquisitions in the future. Add to that the need for greater efficiency as technology vendors integrate and eliminate redundant costs, and you have an industry ready for mergers and acquisitions that alter the landscape.
As consumer behavior and the technology that drives media revenue continue to evolve, consolidation will also reflect the future needs of the industry’s supply chain. Naturally, clear winners will emerge and the inevitable consolidation will permanently reshape and redefine the media industry.