February 2, 2017 – Solganick & Co. has issued its latest Digital Media M&A Update for Q4 2016.
2016 was fraught with geopolitical uncertainty. For US dealmaking, H1 saw increased regulations from the Obama administration, whilst H2 was dominated by the election of Donald Trump. The latter’s campaign, wildly favored by the populist wave sweeping much of the world, called for deeper scrutiny of deals with foreign buyers.
United States M&A
In Q4 2016, deal value totaled $478.7 billion, compared to $402.8 billion in Q3 2016.
YTD 2016, US M&A deal value dropped 29.6% from $1.89 trillion 2015 Q1-Q4 to $1.46 trillion YTD.
This years largest deal happened in the US in October resulted in a $105 billion increase of deal value. Overall, the US captured 45.2% of the global market share, compared to 24.6% for Europe and 20.3% for Asia.
Digital Media/eCommerce was the most active segment.
Digital Media M&A
Q4 value decreased to $18.8 billion which is 19% down compared to the previous quarter
Deal volume decreased marginally 13% compared to 318 in Q3 2016.
Strategic acquirers accounted for 93% of deal volume in Q3 2016.
eCommerce made up the largest portion of the Digital Media sector with 50% of deal value and 37% of deal volume.
Strategic buyers completed 169 deals in 2H16, of which 48 were worth $13.1 billion in aggregate reported value. In the fourth quarter, strategic deal volume was down 12 percent compared with 3Q16, while reported value was down 41 percent.
EV/Revenue Multiples Range: 1.42x to 4.02x
Digital Media M&A Drivers 2016-2017
Cross Device Optimization: Over half of local searches happen over mobile devices “i.e. restaurants near me.” Since 2008, the average American adult has increased his mobile device usage 1,000% from 0.3 hours daily to 2.8 hours daily and doubled their total time on digital media from 2.7 hours daily to 5.8 hours daily. 97% of Millenials are mobile users while 20% do not use a desktop or laptop at all. Businesses that incorporate a mobile friendly website are much more likely to win over potential customers.
Artificial Intelligence: Digital marketing has taken a Darwinian approach with AI since newer algorithims can evolve ads by gauging customer reactions to different creative features such as different copy, colors, fonts,and images. Features that do not engage a user are removed while the others are kept in circulation for future executions of the ad. Automated creativity is already entering the mainstream; the Assosciated Press has already used a “robot” journalist to publish financial news from financial data. In the future as computer creativity becomes more advanced, ads may start to write themselves from scratch.
Digital Agency M&A Drivers 2016
Non-Media Companies Acquiring Digital Agencies: Non-media companies are breaking into the digital marketing sector through strategic acquisitions. IBM purchased Apertio in February for its existing digital marketing services and to expand its list of clientele. The acquisition has improved IBM’s consultative services, increased its market presence in Europe, and strengthened its ability to cross-sell to major customers, Airbus and Volkswagen. Ebay completed a similar transaction with Cargigi in March while Accenture has acquired a handful of digital agencies this year.
For the complete report, go here: Solganick Digital Media MnA Report Q4 2016 (Feb 2 2017)
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