Author: Nati Cucalon-Robles

We are anticipating a significant rebound in M&A activity for the Marketing Services sector as we enter the back half of 2024. Supported by our recent Digital Services market studies in Europe and North America, where we interviewed executive leaders at global independent digital services companies, as well as recent signs of broad recovery in global M&A activity.

Transaction activity in Q2 2024 shows an 11% increase from Q1. In Q2 2024, 424 transactions were completed globally, up from 383 in Q1 2024. This rise is particularly significant as Q1 marked the eighth consecutive quarter of decline from a peak of 617 transactions in Q1 2022.

*Source: Pitchbook Financial Database

Within the Marketing Services sector specifically, our recent engagements and pitches indicate robust activity for Q4 2024, with the potential to return to recent peak volumes in the first half of 2025. This optimism is shared by many in the industry, reflecting a broader sentiment of recovery.

Factors driving this positive trend include the following:

• Decline in inflation and interest rates: Declining inflation and the anticipation of interest rate reductions are primary influences, which in turn are easing debt markets and facilitating transaction activity.
• Recovery of marketing budgets: Marketing budgets are bouncing back faster and being deployed more rapidly, improving visibility, and leading to the majority of agency CEOs interviewed anticipating stronger performance in the second half of 2024.
• Backlog of companies seeking an exit: Several Private Equity-backed Digital Services platforms are eyeing an exit after delays of up to 24 months, with many waiting for three to four quarters of robust growth as a trigger to launch a process.
• Olympics and U.S. Presidential Election:  Notable spending attached to the Summer Olympics and anticipated windfall of political budgets will create additional momentum.
• Operational efficiencies beginning to be felt with AI:  The adaptation of AI as an efficiency tool across disparate operational functions from Enterprise to SMB businesses are beginning to be realized.

As we navigate this dynamic landscape, the groundwork is being laid for sustained recovery in Global Marketing Services M&A activity, reflecting renewed business confidence and economic stability.  

If you would like to speak to us about this topic or the broader market, please contact us.

 

Director, Patricia Vicente, recently attended the Mergermarket Private Equity and M&A Forum in Madrid, Spain. An annual event that gathers stakeholders across the Iberian M&A and Private Equity market to hear industry leaders participate in interactive panel discussions, and network with others in the dealmaking community. Here are her key reflections from the event:

General Market Conditions

Although 2023 was a challenging year, the Spanish economy has shown some resilience, attracting substantial international interest including in the Tech space.  However, many transactions took longer to close and were harder to execute, due to increased due diligence requirements and the introduction of more complex earnouts to bridge valuation gaps.

Private equity activity was impacted by general market conditions.  Yet, there were some significant transactions that took place including JEGI CLARITY advising on the Bridgepoint investment in Samy Alliance, that accelerated the company’s growth as a social-first integrated digital marketing company.

As those at the event concluded, there has been a positive shift in sentiment recently, with the Technology, Media and Telecommunications (TMT) market buoyant in the first half of the year. Internet, Software and IT services ranked as the second most active sector based on the number of transactions in the first month of this year. 

There is optimism after the European Central Bank (ECB) reduced interest rates, from 4% to 3.75%, fostering a positive market outlook.  Combined with transactions such as Cinven’s sale of agritech company Planasa to Germany’s EW Group, with a reported valuation of around EUR 900m, there are clear signals of market momentum.

Source: Mergermarket

Healthy Pipelines

Key plenaries and stakeholders agreed that transaction pipelines appear robust, with the expectations that the valuation gap will narrow. Despite last year’s challenges, high quality assets that traded last year held their value well.

Future activity will require innovation

Attendees acknowledged that future activity would require innovation and flexibility from buyers, with bidders utilizing alternative finance tools and seeking ways to cover liability where the seller is not willing to assume it. Debt is also making a comeback, including more diverse funding sources and creative solutions. There was also optimism about a resurgence in initial public offering (IPOs).

If you would like to speak to us about the Iberian or EMEA markets, please contact Patricia Vicente directly.

 

While the digital services industry faced challenges in 2023, there are signs for recovery and growth in 2024, with a focus on building integrated capabilities, leveraging AI, and driving scale via M&A.

JEGI CLARITY and CIL have conducted a comprehensive survey of leading independent businesses in the European digital services market to understand their outlook for 2024 and what opportunities they see for the year ahead.

The survey focused on three areas:

• Market conditions: how demand for services has changed in 2023 and likely areas for growth in 2024.
• Industry trends: how margin dynamics have impacted group structures and which trends are having the greatest impact.
• M&A outlook: which areas are going to be the focus for investment and what
  is the outlook for M&A.

If you would like an in depth discussion on this topic please contact us. 

Recent breakthroughs, such as the advent of Generative AI tools herald a new era set to rival the impact that personal computers, the internet, and smartphones had on our lives.

This wave of innovation has the potential to propel industries forward at a pace, promising to revolutionize the way businesses operate. Tasks, once mundane, are being automated, insights are generated with greater precision, and decision-making is reaching new heights of sophistication. At the same time, AI is opening up fresh avenues of growth, sparking product and service innovations, redefining value propositions and driving operational efficiencies.

One fundamental theme, something that has been consistent across all of our research, remains the importance of the human touch. As the story unfolds, AI’s true power lies in its ability to complement and enhance human capabilities, accelerating progress and efficiency, and delivering higher quality end products and experiences. Firms are actively harnessing AI and related capabilities fueling a surge in M&A activity, as they strive to gain an edge in an increasingly digital economy.

Our report is designed to identify key themes arising from AI developments and their subsequent impact on businesses and M&A
across the following sectors:

We look forward to continuing the conversation as the story unfolds. In the meantime, if you have any queries or would like to have an in depth discussion on this topic or the broader market contact us.