- Private equity firms continue to pour money into ad agencies, despite the slowing economy.
- They made up 40% of the 500 M&A deals in tech, digital, media, and marketing in the first quarter, per Ciesco.
- Insider identified 18 firms like Blackstone and Carlyle Group that are spending big in the space.
- See more stories on Insider’s business page.
This article was originally published in 2021 and has been updated with new information.
Private equity firms continue to pour money into the advertising sector, despite the slowing economy.
Five hundred technology, digital, media and marketing deals were announced in Q1 2022, up 17% year over year, according to a report from M&A advisory firm Ciesco. PE firms were the most active in the space, representing 40% of those deals.
Most of the deals came from digital agency, martech and digital media, with 86, 67, and 64 deals, respectively. Digital agencies were the most successful targets of these transactions, with a 72% increase in deal activity in the quarter versus a year ago, per Ciesco.
And while rising interest rates could dampen dealmaking for the rest of 2022, PE firms are still sitting on $1.6 trillion they’re looking to invest, according to the firm.
“There is definitely still money flowing in,” said Stephen Master, principal at PE firm GTCR.
Digital advertising’s explosion has lately drawn PE investors who long shunned the ad sector for its lack of tangible assets. Agencies also are spending more on tech, behaving more like software companies, and making them more attractive to investors. Agencies, for their part, are welcoming the investment to fuel expansion.
More PE firms have been entering the sector, managing director Marc Flor of investment bank Berkery, Noyes & Co., has said. Some, like CI Capital and GTCR, have launched groups dedicated to marketing. They’re competing for deals with traditional ad holding companies like WPP and Omnicom, as well as newer ad networks like S4 Capital, Stagwell Group, and You & Mr. Jones.
Master said some PE firms are looking to capitalize on the economic uncertainty that’s causing advertising companies to be undervalued, while others are waiting to see how marketing budgets play out as companies in areas like finance and auto pull back on ad spending.
Specifically, private equity is eyeing digital agencies and adtech companies with subscription-based models that aren’t tied to ad spending cycles, Master said.
Adtech companies also have become deal targets due to declining stock prices, some industry experts say.
Insider identified 18 of the most active PE firms in the space, listed alphabetically, based on recent deals and conversations with bankers, agencies, and investors.
Representatives for the PE firms either declined to comment or didn’t respond to requests for comment unless otherwise noted.
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