The Investment Banker Perspective: A New Crop Of Ad Tech Acquirers Is Emerging

Elgin Thompson, managing director of Digital Capital Advisors, will speak at AdExchanger’s upcoming Programmatic IO conference on April 10-11 at the Marriott Marquis in San Francisco.

The passion of Wall Street’s 2013-era love affair with ad tech may have cooled, but investment banker Elgin Thompson expects the industry will produce some noteworthy exits yet.

“I don’t believe in doom and gloom,” said Thompson, managing director at Digital Capital Advisors, which recently advised Adbrain during its acquisition by The Trade Desk in October.

“Warren Buffett put it like this: ‘Be fearful when others are greedy and greedy when others are fearful,’” Thompson said, “And it might just be time to get greedy about ad tech, because everyone is down on us.”

But which strategic acquirers are most likely to get busy this year? The crop of potential suitors is vast, from telcos to private equity to parent company noobs like The Trade Desk.

The challenge for ad tech companies looking for an exit is to stand out from the madding crowd.

“There’s a good and growing community of buyers for programmatic solutions; at the same time we’re seeing a multiplicity of providers and continued fragmentation,” Thompson said. “There are just so many solutions in the marketplace right now.”

AdExchanger spoke with Thompson about the pitfalls of ad tech “buzzword soup,” how artificial intelligence is a differentiator and why ad tech CEOs shouldn’t bank on China for their exit.

AdExchanger: I’m an ad tech company and I want to get acquired this year. Whose door am I knocking on – and who’s actually going to answer?

ELGIN THOMPSON: First, we have to turn the page on the old-school names, like Adobe, Oracle, IBM and Salesforce. Those companies have, for the most part, rounded out their various suites. They seem comfortable with where they are and now they’re at the point of stitching it all together internally.

But that likely requires business development partnerships with folks that don’t necessitate inorganic activity. If you’re the CEO of an ad tech company, I’d say it’s time to start cutting partnership deals with those attractive legacy names.

But then who’s left on the acquirer side?

I can see a version of AOL/Oath emerging again, maybe by the end of this year. They spent the last year and half integrating everything they’ve got – and rightly so – and taken a pass on everything that’s come up for sale, but they could get acquisitive.

AT&T, with Brian [Lesser] and [Kirk McDonald], is well-positioned and they certainly understand this space better than most. Once they get the lay of the land, I imagine they’ll get their checkbooks out in force.

And then we have to look at the companies that have gone public over the past couple of years, like The Trade Desk on the ad tech side and SendGrid on the mar tech side. This new cohort has the currency and they’re still in that true growth mode.

What about private equity?

Absolutely. We’ve seen a lot of that with Vista Equity Partners and Mediaocean, Neustar and Golden Gate Capital and Sizmek and Vector, which bought Rocket Fuel. With Sizmek, when the Rocket Fuel integration is complete, there will be transactions to be had there on the buy side.

We’re looking at the maturation of this space and this new cohort of buyers will manifest in time.

Despite all of the consolidation we’ve seen in ad tech, there are still a lot of indies out there. What type of companies are in demand?

Right now, data is the topic du jour: what to do with it, where you’re getting it, how are you optimizing it, is it first-party or third and is there an intelligence layer on top to make it smarter and more actionable.

The intelligence layer is where we see opportunity, but there’s also a lot of noise around AI, and if you don’t have a clearly articulated differentiator, you can’t break into any of the larger buyers. Acquirers are looking for solutions, not buzzwords.

It gets to a point where all of the three-letter acronyms – DSP, SSP, DMP, CDP – don’t mean anything. It’s buzzword soup.

Are we likely to see other ad tech companies go public this year?

I’m an optimist, so I’ll say yes. Look at The Trade Desk. They quietly did their thing through the back channels and sold the institutional investor community on their vision, direction and the opportunity. It resonated, they went public and they’ve been off and running ever since.

There was brief moment in time a couple of years ago when China was being ballyhooed at the sexy new exit. Has that ship sailed?

It has, and the reasons are mainly China-driven. China doesn’t want its dollars flowing outside its borders, specifically to the US. That door is closed, at least in the near and medium term.

I look at the deals that did happen as anomalies. We’ll still see Asia buying assets, but not attention-grabbing deals. It’ll likely be under the radar. Then again, it’s so difficult and political in China that it’s hard to predict the outcome, and if there’s one thing that boards and CEOs are looking for, it’s some certainty of outcome.

This post was syndicated from Ad Exchanger.