Table of Contents
- M&A activity for advertising companies surged in 2021 as ad spend bounced back.
- Insider asked 13 investors and industry experts which areas will be hot in 2022.
- From CTV adtech companies to specialized agencies, these are the trends most likely to rock M&A in 2022.
Advertising-related companies were hot acquisition targets this year as the ad industry recovered from slashed ad spend and digital ad spending soared. Active adtech investment bank Luma Partners, for instance, typically advises on a half dozen deals a year, but has participated in 17 transactions so far in 2021.
After a year of high-profile deals for agencies, adtech, public relations, and e-commerce companies, experts expect another big year in 2022 as money flows into areas like
TV, performance advertising, and analytics.
PE firms were particularly active in adtech, having invested in 86 deals in 2021, up from 43 deals in 2020, according to PitchBook data. Notable deals this year included TripleLift being acquired by Vista Equity Partners and Assembly buying retail adtech firm Pacvue.
Private equity considered adtech high-risk for the last few years, said Stephen Master, a principal at PE firm GTCR. But then Viant’s IPO in February 2021 opened the floodgates and investors realized they could reap rewards from the sector, even from companies that weren’t leaders like The Trade Desk. Taboola, DoubleVerify, and IAS went public later in the year, and GTCR is now looking to invest in adtech firms with $80 million to $100 million in annual revenue.
Insider asked 13 investors and industry experts to name the areas and companies that they’re most interested in 2022 and why.
Performance marketing is a key area for both agencies and investment firms
The past year brought a number of performance marketing-minded deals, and experts expect to see more of the same in 2022. In 2021, for example:
- Omnicom Media Group acquired performance marketing firm Jump450
- Tinuiti acquired streaming TV ad buying firm Bliss Media
- Publicis Groupe bought retail media tech company CitrusAd
Investors and execs said that they’re looking for agencies with a niche focus so they can offer clients more services.
Adam Edelman, CEO of Boulder Heavy Industries, which invests in agencies and tech startups, said that his company has looked at six agencies this year, two of which specialized in Amazon and one that specializes in B2B marketing for financial services companies. “Specialization is the future for agencies,” he said.
Zach Morrison, CEO of digital media agency Tinuiti, said he isn’t interested in buying a traditional creative agency but would be attracted to one that has also developed its own tech services.
WPromote, a performance ad agency backed by PE firm Shamrock Capital, has made six acquisitions, including performance marketing agency Visiture this year.
Mike Mothner, CEO of WPromote, said that he expects to see agencies acquire companies that specialize in specific areas as potential acquisitions. He named firms that focus on short-form video, TV ad buying, and Amazon specialists as particularly hot targets.
Agencies are acquiring these companies because marketers are looking to work with less agencies, he said.
“Marketers that use different agencies end up with a complicated attribution problem.”
Buyers are looking for analytics firms
Tinuiti’s Morrison said he’s also seeking measurement companies as advertisers ask for more proof that their ads actually drive sales. Tinuiti previously acquired Bliss Point, A CTV company that both sells and measures ads, and a TikTok specialty agency with its own data platform would be attractive, Morrison said.
The PR industry is also looking for analytics shops.
Matt Rizzetta, chairman of North Sixth Group, a holding company that is raising private-equity, said that companies and tools that help improve and monitor the reputation of a brand are hot targets. But he predicted less money would flow into influencer and data analytics in 2022 because those areas have matured and the bar to entry has gotten higher.
Cookieless ad companies are red hot
New consumer privacy regulations and Google and Apple’s moves to eliminate third-party cookies are sending advertisers scrambling for new ways to target and measure ads. And investors are pumping money into technology that promises to save digital advertising’s ability to target and measure based off of online identities.
Sarah Fay, managing director of VC firm Glasswing Ventures, said that InfoSum, whose software helps companies share data, could also be an acquisition target due to its size.
“Everyone is going to have to get really serious about compliance, so the players in that space are targets,” she said.
E-commerce advertising could see more consolidation
A number of companies that buy and sell retail media ads were snapped up in 2021. These firms have relationships with big retailers with ad platforms like Amazon, Walmart, Target, and Instacart.
Managing director and partner Matthew Hasson of M&A firm Palazzo Investment Bankers said that he expects to see more acquisitions of companies that specialize in one retail ad platform or have proprietary tech.
Kevin Prokop, managing director at PE firm Rockbridge Growth, which owns Amazon adtech firm Quartile, predicted that adtech firms that can develop different types of ads would be hot acquisition targets in 2022. For example, retailers are experimenting with new ad formats beyond sponsored listings, like video and programmatic.
M&A activity in retail media has also been boosted thanks to the growing number of adtech companies that help retailers build their own ad businesses. He also noted investor interest in companies that help advertisers manage ad spend across multiple retailers.
“Everyone is looking at Amazon, who is driving $30-billion-plus a year from ads,” Prokop said. “If retailers can get a small slice of that, it’s material dollars.”
Streaming TV ad companies are in demand
Consumers are shifting their viewing to streaming, and adtech companies are racing to grab a piece of large budgets that follow.
Firms like Magnite, for instance, are spending big on adtech companies that help publishers and broadcasters manage their CTV inventory.
There’s also demand for tech firms that can improve ad formats and ad delivery. There’s a need for adtech companies that create higher quality ad formats in streaming. CTV also faces a user experience challenge, because people are still often bombarded by the same ad. Investors are interested in companies that can solve these issues.
Measurement is also important for the CTV industry to figure out because the lack of measurement makes advertisers hesitant to invest.
“The ad spend isn’t flowing as fast as people want it to because you can’t measure it as well as you can the other stuff — the tech is still being developed,” said one investor who spoke on background.
But numerous tech firms are working toward a solution, and companies like TVision and iSpot.TV are viewed as acquisition targets because they’re trying to challenge Nielsen’s dominance over TV measurement.
Despite this change, Mike LaSalle, partner at Shamrock Capital, is still interested in companies that benefit from linear viewership. For instance, his firm is particularly bullish on sports investments, partly because live sports remains a big draw for linear TV viewers.
“We continue to be big believers in sports because we believe there is real scarcity in aggregating audiences on a timely basis,” he said.
Firms in the healthcare area will remain in high demand
Healthcare has been a big area of investment over the past five years as more money moves into pharmaceutical marketing. And the pandemic has ensured this trend will continue in 2022, said Rick Gould, managing partner at Gould + Partners, an M&A consultancy that works primarily with PR agencies.
In PR specifically, corporations want to hire specialists that can help them communicate with employees, local lawmakers, and the general public on sensitive issues like vaccination requirements and workplace safety procedures.
However, healthcare consolidation has been underway for the past five years starting after Real Chemistry (formerly called W2O Group) sold a stake to private equity firm Mountaingate Capital in 2016 and sold another stake to New Mountain Capital three years later. With that cash, Real Chemistry went on a buying spree, rolling up 11 companies in the data analytics, influencer, and creative spaces.
“Anything on the commercial side of the drug business will be extremely in demand. We have several companies we’re taking to market next year,” said Hasson of Palazzo. He cited Eversana’s $950 million acquisition of healthcare marketing firm Intouch Group and said the big holding companies will be interested in this space; IPG launched a new health division in summer 2021.
Crypto and the metaverse are new investment areas
Crypto companies are spending more on advertising and becoming big clients for agencies and adtech firms.
One of the challenges for crypto companies is building mass awareness and also acquiring users.
Dan Pantelo, CEO of martech firm Marpipe, predicted that a crypto company might buy a midsize agency and absorb it to produce more ads. “Venture money is all flowing into crypto, and the winners will go on M&A sprees,” he said.
Brandon Hoffman, senior investment manager at Samsung Next, said that crypto ecosystems like Solana and Polygon are spending more money on marketing and poised to make acquisitions in the space since Facebook and other platforms have relaxed their restrictions on crypto advertising.
Experts also expected to see more interest in metaverse companies. A company like Republic Realm, which handles metaverse real estate, could buy a company that makes virtual billboards to put ads in this space, said Pantelo.
Project management and ad-buying platforms for small-to-midsize businesses will be attractive
Big agency holding companies have Google and The Trade Desk as ad-buying platforms. But GTCR’s Stephen Master sees increasing demand for ad sales platforms and related tools that serve small advertisers.
In October, Blackstone joined GTCR to invest in Simpli.fi, a demand-side platform for mid-sized ad agencies, at a $1.5 billion valuation. Simpli.fi previously acquired The Advantage Software company, which helps these agencies and brands manage the ad-planning and ad-buying process.
GTCR also acquired BluHorn, another ad-buying software company serving small agencies. A similar company could help Simpli.fi carve out a niche for clients too small for The Trade Desk, and GTCR is currently looking at five or six potential targets in the space, Master said.
The event marketing software industry will consolidate thanks to millions in PE and VC funding
As advertisers scramble to get back into live and virtual events, tech companies in that space will be attractive to investors, said Bizzabo CEO Eran Ben-Shushan. Bizzabo, a virtual events platform, raised $138 million in a December Series E round led by VC firm Insight Partners.
In other big moves in 2021, Cvent went public for the second time in a $5.3 billion July
deal; virtual events startup Hopin raised $450 million at a $7.75 billion valuation; and Hubilo took in another $125 million.
Ben-Shushan predicted more investment and consolidation in 2022 as PE and venture-backed companies seek startups that can help them assemble all-in-one packages for event organizers and connect advertisers with attendees.
One key area, for instance, will be wearable technology that gathers data from attendees as they network, said Ben-Shushan. Bizzabo acquired wearable tech company Klik in November.
Other hot targets include streaming video companies specifically designed for live and virtual events, such as Bizzabo acquisition TeeVid, as well as startups that help event planners and vendors sell their goods in person or online.
And many of these startups will face more pressure to sell as it becomes harder to scale as video conference companies like
, Amazon, and Microsoft move into events, Ben-Shushan said.