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.

4 comments about "Ad, Media M&A Interest Heats Up: Interactive Agencies Reap Low-End Of Multiples".
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  1. Keith McCracken from McCracken Advisory Partners, December 29, 2011 at 10:41 a.m.

    We agree with the prediction an upswing in M&A activity in 2012.

    Interestingly, the classification of agencies along with an appropriate EBITDA multiple for acquisition targets has become more complicated as digital expertise has more or less been commoditized across most marcom disciplines.

    Consequently, the difficulty of sorting out the best of the digitally integrated acquisition targets will fuel a stepped up determination among buyer's to identify sellers with authenticity of practice excellence not to mention unambiguous financials to match.

    Keith McCracken
    McCracken Advisory Partners

  2. Kevin Planovsky from Vert, December 30, 2011 at 10:37 a.m.

    Very Interesting... have any of you heard of ;)

  3. Michael Draznin from Michael Draznin Consulting, December 30, 2011 at 11:16 a.m.

    I find Keith McCraken's comment especially interesting. It's a timely reminder of the need for agencies to consciously (and strategically) to develop and manage their own company brand reputation, much as they do for their clients. Excuse if I'm stating the obvious here, as I am, but with the close of 2011 and start of 2012 a day away, it's the right time to do so, imho.

  4. Aditya Guru from Genisys, January 2, 2012 at 5:42 a.m.

    Good to read regarding the current m&a deal making environment in the advertising and media industry.Just read an excellent white paper on strategies for successful post m&a integration

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