According to a survey released today by M&A firm AdMedia Partners, an overwhelming majority (81 percent) of senior executives at leading marketing services, media and related technology companies believe mergers and acquisitions by strategic buyers in the industry will rise in the coming year.
Respondents generally had a positive outlook for M&A in these sectors, driven in particular by digital and data. Expectations for M&A activity in 2015 were overall up, with similar to slightly higher valuation levels to 2014. However, many respondents viewed valuations as fair for both sides: a good time for sellers to achieve liquidity, and a good time for buyers to acquire strategic and growing assets in a favorable financial environment.
Seth Alpert, Managing Director at AdMedia Partners, said, “Most of our respondents feel that this will be a good year for both buyers and sellers, reflecting a general sentiment that there are interesting strategic acquisition opportunities to enhance digital and data-driven service offerings. We are seeing a strong demand for integrated digital agencies with expertise in mobile, social and analytics and for related proprietary technology solutions.”
2014: A Busy Year for M&A
Consistent with the continued positive expectations for M&A, 63% of respondents were approached by a buyer in 2014. There was a notable increase over last year in the number of respondents who made acquisitions (35% versus 25%), were involved with a merger (11% versus 7%), or were acquired by a strategic buyer (11% versus 7%).
2015: Positive Outlook for M&A
The vast majority (81%) of respondents believe that M&A by strategic buyers will increase in 2015; for financial buyers this number is 55%, up from 49% last year. Likewise, 82% of respondents would advise buyers to act now, and 65% would advise sellers to act now, the highest percentage in 14 years.
Growth Expectations
The median expected growth rate in 2015 for respondents’ own businesses increased to 18%, up from 13% for the previous four years. Likewise, growth expectations for digital and other non-traditional media channels are strong, with a high percentage of respondents expecting growth of at least 15% in mobile ads, custom content/native advertising, and programmatic.
Optimism on Valuations
The weighted averages for expected EBITDA multiples by sector fall within a relatively tight range, and we have lined these up compared to respondents’ interest in these sectors. Among the results:
Consistent with last year’s survey, the areas in which respondents were most interested expanding or acquiring were in the digital/data sector, and these areas tended to command the highest valuation expectations. In four of the five areas of highest interest—analytics, digital agencies, mobile and CRM/database—the interest level increased over the prior year.
Expected multiples increased slightly in 7 of the 15 categories, and were constant in the others.