M&A in tech, digital, media and marketing is bouncing back

03 May 2021 Consultancy.uk 5 min. read

Global M&A activity in technology, digital, media, and marketing bounced back in the first quarter of this year, passing pre-pandemic levels, according to a report by M&A advisory firm Ciesco. 

The 40-page study by Ciesco, a specialist M&A advisory firm operating in the technology, digital, media and marketing sectors, reported 472 closed transactions in Q1 2021, a 36% increase year-on-year from Q1 2020. The first quarter of 2020 was a strong, pre-Covid quarter, when 346 deals were recorded, but Q1 2021 has been an even stronger increase, of 80%, on Q1 2019. 

The M&A consulting firm also found that the overall disclosed value of deals has risen from $12.4 billion in Q1 2020 to $28.4 billion in Q1 2021 – just under the Q1 2019 level of $30.2 billion. 

Annual deal volume and value 2021 - 2020

Ciesco said companies are fighting to stay well ahead of trends driven by the pandemic, such as shifts in working practices and environments, lifestyles, facilities, shopping and healthcare. The firm added that desired assets are rarer than the capital available to buy them, and this is driving competition on the buy side to go after ‘premium assets and capabilities’.

The pandemic has been found to have little impact on the valuations of healthy businesses and even a positive impact on ‘premium’ companies, especially the ones that traded well through 2020. Chris Sahota, CEO of Ciesco, said, “M&A activity has surged above pre-Covid-19 levels. Companies are racing to acquire the capabilities they need to thrive in this new world.”

“This all plays into reinvention, one of the watchwords of 2021. Technology and data are driving it. Buyers are very interested in consumer and B2B data analytics, social listening tools and e-commerce, among other technological capabilities. This trend will accelerate.”

Quarterly deal volume and value 2018 - 2020

“Q1 activity shows a widespread ambition among businesses in technology, digital, media and marketing to adjust to the new normal as fast as possible and flourish in the post-Covid-19 era.”

Financial sponsors

Private equity firms have shown a growing appetite for deal-making across tech, digital, media and marketing. Deal volume has increased 73% in 2020, with 218 deals announced this past quarter. The disclosed deal value of these has almost doubled, reaching $13.4 billion.

Financial sponsors made up 46% of all transactions in Q1, compared to 36% in Q1 2020 and 43% in Q1 2019. Private equity buyers are acquiring both platform and bolt-on businesses across a range of sectors. 

Percentage of deals by PE buyers 2017 - 2020 PE deals volume and value 2017 - 2020

Among the big investor-backed deals are Avedon Capital’s acquisition of Netzkern and Macaw, which created a new significant tech services group and the largest Sitecore player in Europe; TripleLift, one of the largest AdTech platforms in the world, announced its sale to Vista Equity Partners for $1.4 billion and the UK-based online consumer intelligence and social media listening platform, Brandwatch, was also acquired by Cision (owned by Platinum Equity), for $450 million.

Ciesco sees activity growing around consumer research and social and analytics tools in particular, as well as e-commerce solutions, business productivity solutions, MarTech, AdTech and e-gaming. 

The majority of private equity investors are reporting that their highest-priority objective in 2021 is to deploy their capital on new platforms and add-ons to existing platforms. Currently, private equity investors are sitting on over $1.5 trillion of raised capital globally. 

Global deal volume by region 2020

A recent global survey by EY found that nearly half of surveyed C-suite executives were planning an acquisition in the next 12 months, focusing on international growth over domestic. Almost two-thirds (63%) of companies also planned to increase investment in tech and digital capabilities. Just under two-thirds (57%) will increase investment in customer engagement. 

Top buyers?

According to Ciesco, in the tech, digital, media and marketing spaces, S4 Capital and Accenture were the most active buyers in Q1. Each recorded six acquisitions. S4 completed three acquisitions via Mediamonks and three by MightyHive. Accenture acquired companies in digital design, transformation and consulting. 

Among other top buyers in the space are Pocket Outdoor Media, a content, experiences and travel company, with four acquisitions and Digital Turbine, Twitter, Clearlake Capital Group and The Carlyle Group with three transactions each. 

Most active sectors by deal volume 2018 - 2020

Digital, MarTech and media were the most active target sectors in Q1 2021, representing 61% of all deal activity and the greatest rise in deal volume, an increase of 55% across these sectors. There was a fall in activity in the events sector and the strategy & creative services sector. 

The two largest markets remain the USA and the UK, where 196 and 57 deals were struck, respectively, representing 54% of overall activity and a year-on-year increase of 12%. They were followed by Germany, France, Canada, Sweden and Italy. These countries combined represent 77% of all global deal activity.