M&A deals bounce back in Q1, digital and martech most active target sectors

M&A activity recovered from and exceeded pre-pandemic levels in the first quarter of this year, as companies compete to stay ahead of new living and working trends by acquiring needed capabilities. According to specialist advisory firm Ciesco, there were 472 transactions during this period, a 36% increase year-on-year from Q1 2020, and an 80% increase from Q1 2019. The overall disclosed value of deals also jumped from US$12.4 billion in Q1 2020 to US$28.4 billion in Q1 2021, just under the Q1 2019 level of US$30.2 billion.

S4 Capital and Accenture were the most active buyers in the first quarter of the year, each recording 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 were 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.

The 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. Meanwhile, Ciesco noted a fall in activity in the events sector and the strategy and 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.

Meanwhile, Ciesco said 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, Ciesco said these investors are sitting on over US$1.5 trillion of raised capital globally.

Private equity firms have shown a growing appetite for deal-making across tech, digital, media and marketing. Earlier this year, Ciesco said in its M&A outlook report for 2021 said private equity firms are predicted to have "a very strong appetite" for merger and acquisitions deals in the technology, digital, media, and marketing sectors. Overall in 2020, private equity represented 37% of all deal activity in the technology, digital, media, and marketing sectors.

Among the major private equity deals are Avedon Capital’s acquisition of Netzkern and Macaw; adtech platform TripleLift's sale to Vista Equity Partners for US$1.4 billion; and UK-based online consumer intelligence and social media listening platform, Brandwatch, selling to Platinum Equity-owned Cision for US$450 million.

Additionally, strategic buyers are finding themselves playing catch-up, having recognised the need to invest in new capabilities in order to drive growth. There was a 15% year-on-year increase in Q1 activity among them, with 254 transactions announced in 2021. Last year, strategics chose to strengthen their cash positions and wait out the uncertainty while remaining vigilant to changes that could potentially strengthen their businesses as the pandemic reached its final stages. According to Ciesco, the competition activity over the past several months has generated a more attractive selling environment for business owners so inclined.

Ciesco's CEO Chris Sahota said buyers are congregating around consumer and B2B data analytics, social listening tools and eCommerce, among other technological capabilities. He added that this is a trend that will only accelerate. “Overall, what Q1 activity reflects is a widespread ambition among businesses in technology, digital, media and marketing to adjust quickly to the new normal and put themselves in the best position to flourish in the post-COVID-19 era," Sahota said.

Photo courtesy: 123RF

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Analysis: Private equity firms hungry for digital, media and marketing M&A deals in 2021