Martech M&A deal value doubles to $7.2B amid 'scramble' for data, study says

Dive Brief:

The value of mergers and acquisitions (M&A) in the marketing technology sector nearly doubled to $7.2 billion in the first half of 2019 from a year earlier amid a scramble for consumer data that support ad campaigns. Forty percent of the top 30 acquisitions in the past six months were for martech companies, per an announcement that consulting firm R3 shared with Marketing Dive.
French ad giant Publicis Groupe was the biggest buyer during the first half with $4.47 billion in deal value, including the $4.4 billion purchase of data-marketing firm Epsilon, although holding companies as a group saw deal growth in the mid-single digits. WPP and Omnicom didn't make any acquisitions in the first half, per R3.
Martech deals outpaced M&A in the broader marketing services industry, which rose 43% to $13.6 billion during the first half among the 235 transactions that R3 studied. "It's a scramble for first-party data, and the increased valuation and spend on martech companies reflect that value," Greg Paull, co-founder and principal at R3, said in a statement.

Dive Insight:

R3's analysis of marketing services M&A reflects several trends, including the rising importance of martech. Information and analytics underpin the targeting, personalization and attribution needs of marketers that seek to translate big data into meaningful insights. Publicis's $4.4 billion takeover of Epsilon, a deal announced in April and closed earlier this month, reflects that trend.

While Publicis had the biggest M&A deal during the first half, ad holding companies like WPP and Omnicom mostly sat on the sidelines, R3 observed. WPP has been more focused on divesting underperforming assets that are considered non-core to its business. The ad giant this month agreed to sell 60% of its market-research unit Kantar to Bain Capital for $3.1 billion, a deal that occurred outside of R3's analysis of the first half. WPP also sold its minority stake in communications and sports-marketing group Chime Group Holdings for $69 million on July 1. The proceeds from those deals may give WPP more financial firepower for martech acquisitions.

"Holding companies have their focus elsewhere as they urgently need to work out new business operating models as consultancies edge into the industry and in-housing grows in popularity with clients," Paull said in a statement. "The high rollers of marketing M&A continue to be consultancies, private-equity groups and technology companies."

Holding companies are contending with growing competition from non-traditional ad companies like consulting firms that are building on core strengths in technology, strategy and operational expertise to offer a bigger menu of marketing services. Consulting firm Accenture this year made the biggest acquisition in its 10-year history with the $475 million purchase of Droga5, a creative agency that has earned industry recognition for clients such as Amazon Prime Video, IHOP and HBO's "Game of Thrones." With deals valued at $651 million, Accenture was the second-most active buyer after Publicis Group, R3's analysis shows.

R3 also observed a 54% jump to $10.3 billion in marketing services M&A value in North America, mirroring a broader surge in deals that outpaced activity in other regions. U.S. merger volume surged 27% to a record of about $1 trillion in the first half of 2019 from a year earlier, according to Dealogic data cited by The Wall Street Journal, as a healthy economy and new highs for the stock market boosted confidence. Meanwhile, Chinese deal value plummeted by 84% amid heightened trade tensions with the United States and tighter refinancing conditions, R3 found.