NEW YORK, Nov. 27, 2024 /PRNewswire/ — M&A activity in digital marketing services is accelerating, as anticipated by JEGI CLARITY in July. Over the past two quarters, deal volume exceeded the quarterly average of 300 transactions over the last 7 years.
Notable deals, such as ECI’s acquisition of Croud, highlight this trend. Looking ahead, we expect 2024 M&A levels to align with 2023, following the record-breaking momentum of 2021 and 2022.
PRIVATE EQUITY HAS AN ACTIVE ROLE IN DRIVING SECTOR CONSOLIDATION
PE represented 32% of YTD M&A activity in digital marketing services. Key attractions for investors include the market’s impressive growth prospects – with the market projected to increase from £4.3bn in 2023 to £14bn by 2032 (CAGR of 14%).
SCALE AND EXPOSURE TO TIER 1 MARKETS ARE KEY VALUE DRIVERS IN DIGITAL MARKETING SERVICES M&A
Valuations are influenced by several factors:
- Differentiated Proposition: Agencies with scalable, Tech and AI-driven, or specialized services command higher valuations.
- Scale: Our data suggests that size matters when it comes to valuation, with larger assets, EBITDA over £12.5m, trading at a median multiple of 16.5x, while smaller assets, EBITDA between £4m and £7.5m, trade at a median of 10.8x.
- U.S. Revenue Exposure: Higher U.S. revenue draws N. American PE interest (directionally >25% of revenues), creating competitive tension, in turn driving valuations.
- Strong Financial KPIs: attractive revenue growth, healthy margins, and strong client retention are critical for driving valuation multiples.
- Evidence of Integration in Buy-and-Build: For companies following a buy-and-build strategy, successful integration of acquisitions is a key value driver.
M&A GROWTH TO BE DRIVEN BY ECONOMIC RECOVERY, PE EXIT AND DEMAND FOR SPECIALIST SKILLS
PE funds will likely continue deploying capital and exits will accelerate considering current hold periods. On the trade side, large agencies, driven by client demand, are likely to continue acquiring digital capabilities that are difficult to build internally.
Over the next 18 months, several PE-backed digital marketing groups, held for over four years, will likely come to market. We foresee consolidation among large PE-backed platforms across Europe, as agencies look to broaden geographic reach.
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ABOUT JEGI CLARITY
JEGI CLARITY is a pre-eminent M&A advisory firm for the media, marketing, information and technology industries. With a global reach from New York, London, Boston, and Sydney, we have closed more than 800 transactions during our 35+ year history. For more information, visit www.jegiclarity.com.
Contact:
Kelsey Kovachik
Vice President of Marketing
+1 212 754 0710
[email protected]
www.jegiclarity.com/
SOURCE JEGI CLARITY
