Ad, Media M&A Interest Heats Up: Interactive Agencies Reap Low-End Of Multiples
Advertising, marketing and media executives say they are more likely to either buy or sell a media-related business in 2012 than a similar group of executives said at the same point heading into 2011, according to the 18th edition of an annual survey by media industry mergers and acquisitions adviser AdMedia Partners. The results suggest 2012 could be a healthy year for M&A deals, as companies seek to strategically reorganize their products and services, or divest of properties at what AdMedia described as “strong” multiples.
Fifty-nine percent of the respondents said they expect to attempt an acquisition during 2012, vs. only 40% during the same period last year. The Web-based survey of more than 7,300 executives in advertising, marketing and media, did not break the responses down by respondent type, but it did show a significant range in multiples -- the valuation of a potential purchase or sale based on a multiple of the company’s EBITDA -- across industry sectors, with interactive advertising agencies reaping the weakest potential yield.
With a multiple of only six times EBITDA, interactive and Web development agencies were tied with businesses operating in the “custom content” category with the weakest anticipated multiples for 2012.
The catch-all category of “digital media” generated the highest multiple 8 “or greater,” followed by four categories -- analytics/optimization, marketing technology, mobile marketing, and social marketing -- which each have an anticipated multiple of 7 or greater.
The overall “marketing services” category has an anticipated multiple range of 6 to 8.
“In our experience, these reported multiples are often exceeded in competitive processes for attractive companies,” AdMedia’s analysts write in the report, implying that motivated buyers might be willing to pay more than the overall sentiment of the responses reflect.
Overall, buyers seem to outnumber sellers, suggesting that might indeed by the marketplace dynamic. While 59% of respondents are weighing an acquisition in 2012, only 48% said they are contemplating the sale of a company or subsidiary.