Category: Insights

JEGI CLARITY’S 21^ST Annual Media & Technology Conference in New York brought together senior executives and investors from across the global media, marketing, information, and technology sectors.

Hugh Boston and Bob Lockwood explored the evolving landscape of the Tech Services sector, key industry trends, the impact of M&A, and winning strategies for tech businesses looking to stay competitive. Here’s a brief overview of their insightful presentation.

Introduction

Technology services are at the core of business transformation, enabling organizations to operate more efficiently, scale effectively, and deliver greater value. With global IT services revenue projected to reach $1.88Tn by 2025¹, the sector is poised for continued growth.

Key Industry Trends

The Growing Demand for Digital Transformation

Technology services are increasingly seen as mission-critical for organizations seeking to modernize their operations. Businesses are prioritizing digital transformation initiatives, including cloud migration, software integration, and AI adoption. For instance, 75% of EPAM’s top clients are engaged in GenAI programs, underscoring its growing influence on business strategies.

Cloud migration continues to be a major focus, with companies accelerating their shift to cloud platforms to improve agility, scalability, and cost efficiency. This trend is driven by the need for businesses to remain competitive and respond quickly to market changes.

AI and Automation as Catalysts for Growth

Artificial intelligence is playing a pivotal role in transforming the tech services landscape. In 2024, Globant generated $350M from AI projects, while Accenture reported a $4Bn run rate for new GenAI bookings.

AI adoption is driving efficiency through automation, predictive analytics, and personalized customer experiences. Additionally, AI-powered data engineering, analysis, and cybersecurity solutions are becoming essential for businesses looking to safeguard their operations and optimize performance.

Post-COVID Revenue Growth and Stabilization

The tech services sector experienced a significant revenue spike in 2021 due to increased demand during the pandemic, which led to a temporary “COVID bump.”

Following a period of slower growth, the market is now stabilizing, with projected revenue increases of 4% to 5% annually through 2025. Companies like Accenture, CGI, and Cognizant are seeing renewed growth momentum, driven by rising client demand for digital services and consulting. This recovery signals a return to steady, long-term expansion in the tech services industry.

Increased Private Equity Interest

Private equity (PE) firms are heavily investing in tech services, drawn by the sector’s flexible, cash-flowing models and its growth potential. In 2024 alone, the deal value for North American tech services reached $44Bn, with $109Bn² in total global deal value. PE firms are particularly interested in platform-based acquisitions, creating large-scale service providers through strategic add-ons. This consolidation trend is enabling firms to expand their service offerings, enter new geographies, and target emerging customer verticals.

PE has been aggressively building platforms with add-on acquisitions:

 

The Impact of M&A on Tech Services

Driving Scale and Capabilities
Mergers and acquisitions are reshaping the tech services landscape by creating larger, more versatile players. Companies are pursuing M&A strategies to:

• Expand geographical reach – Acquiring firms in new regions to diversify their market presence.
• Enhance capabilities – Gaining access to specialized services, such as AI consulting or cybersecurity solutions.
• Increase customer verticals – Entering new industry sectors through targeted acquisitions.

Platform Growth and Add-On Acquisitions
PE-backed platform companies are actively acquiring smaller firms to scale their operations. This approach is driving significant growth, with add-on acquisitions accounting for a large portion of deal activity. This trend allows firms to rapidly expand their service portfolios while benefiting from economies of scale. It also makes them more attractive to larger buyers, creating favorable exit opportunities for investors.

Consolidation Among Major Players
The industry is witnessing significant consolidation among established tech service providers. Larger firms are acquiring smaller, niche players to offer integrated, end-to-end solutions. This creates stronger, full-service providers capable of meeting the growing demand for comprehensive technology consulting and implementation services.

Winning Strategies for Tech Businesses

To remain competitive in today’s fast-changing environment, tech businesses need to embrace fresh, forward-thinking strategies. Here are five essential approaches to fuel growth and boost marketing performance:

• Prioritize AI-Driven Innovation – Tech businesses that embrace AI-driven solutions will be better positioned to capture market share. Investing in AI-powered data analytics, machine learning (ML), and automation tools can help companies improve efficiency, reduce costs, and deliver more sophisticated services for clients.
• Leverage Cloud Migration Opportunities – With cloud adoption accelerating, tech service providers should focus on cloud migration expertise. Offering specialized services in cloud infrastructure, data engineering, and cybersecurity will attract clients seeking to modernize their operations.
• Pursue Strategic M&A for Growth – Businesses should consider strategic acquisitions that enhance their capabilities and expand their market reach. This could include acquiring firms with complementary technologies or entering new geographical markets.
• Focus on Customer-Centric Solutions – As businesses prioritize digital transformation, tech service firms should offer tailored solutions that align with their clients’ specific needs. Customizing services based on industry verticals and providing measurable ROI will strengthen client relationships.
• Strengthen Cybersecurity and Data Capabilities – With increasing concerns around data privacy and security, offering robust cybersecurity solutions is essential. Investing in data protection, risk management, and compliance services will be a key differentiator.

Conclusion

The tech services sector is entering a period of sustained growth, fueled by digital transformation, AI adoption, and M&A activity. Companies that invest in AI, cloud migration, and strategic partnerships will be best positioned to capitalize on emerging opportunities. With private equity interest driving further consolidation and platform expansion, the sector is set to remain a key driver of business transformation in 2025 and beyond.

For further information, please contact Hugh Boston or Bob Lockwood

¹ Statista ((IT Services revenue consists of four markets: IT Consulting & Implementation, Business Process Outsourcing, IT Outsourcing & Other IT Services including system integration, software installation & support and IT education & training), ² Gartner, JEGI CLARITY

JEGI CLARITY’S 21^ST Annual Media & Technology Conference in New York brought together senior executives and investors from across the global media, marketing, information, and technology sectors.

Hugh Boston and Marcus Anselm dove into the Marketing Services industry, highlighting how technology has increased the sector’s complexity. They also discussed the growing convergence of e-commerce and social media, and how firms can capitalize on this trend to tap into new revenue streams and strengthen customer engagement. Here’s a brief overview of their insightful presentation.

Introduction

The marketing services industry is undergoing rapid transformation driven by technological advancements, shifting consumer behaviors, and evolving business strategies. There are key themes shaping the industry’s future, including the rise of AI, the increase of predictive analytics, greater focus on heightened personalization and automated content.

This article explores these key trends, their implications for businesses, and essential takeaways for firms in the marketing services sector.

Key Industry Trends

Acceleration of Digital Transformation

The marketing landscape has evolved significantly from traditional formats such as print, radio, and linear TV in the 90s to digital-first strategies encompassing search, programmatic advertising, and social media. By 2025, marketing spending is expected to reach $653Bn¹, 70% of which will account for digital marketing spend. This increase in marketing spending is driven in part by innovations in retail media, connected TV (CTV), and programmatic advertising.

The Expanding Role of AI in Marketing

AI is playing a transformative role in content creation, personalization, and predictive analytics. Key statistics reveal that AI adoption has led to a 50%² reduction in campaign time-to-market and a 40%² increase in click-through rates (CTR). Businesses are leveraging AI for ideation, A/B testing, chatbots, and optimization, with further expansion anticipated over the next two years.

Rising Influence of Social Media and Influencer Marketing

Social media advertising is expected to reach $256Bn by 2025³, highlighting the sector’s growing influence. Agencies specializing in influencer marketing, social media management, and data-driven advertising are attracting strong investment. The rise of social commerce, projected to reach $80Bn⁴ in the U.S. by 2025, underscores the increasing convergence of e-commerce and social media.

The Impact of M&A

Mergers & Acquisitions Driving Market Consolidation

The marketing services industry is witnessing increased M&A activity, as brands seek integrated solutions that combine creative, media, and technology capabilities. Omnicom and IPG are consolidating to form the world’s largest full-service advertising firm, reflecting a trend toward full-scale service providers while still maintaining demand for specialized agencies.

Private Equity Interest in Marketing Services

Private equity (PE) firms continue to invest heavily in marketing services, particularly in digital-first and AI-driven platforms. The increasing demand for data-driven, hyper-personalized campaigns has made marketing services an attractive sector for investment, with PE firms deploying over $2.1Tn⁵ in capital to capitalize on industry growth.

Winning Strategies for Modern Marketing Success

To stay competitive in today’s rapidly evolving landscape, businesses must adopt innovative approaches. Here are five key strategies to drive growth and enhance marketing effectiveness:

• Adopt AI-Driven Strategies – Companies must integrate AI into their marketing efforts to improve efficiency, personalize campaigns, and enhance customer engagement.
• Leverage Digital Growth Opportunities – With digital advertising spend surpassing traditional media, brands should prioritize digital channels, including CTV, programmatic advertising, and influencer partnerships.
• Consider Strategic Partnerships and M&A – Businesses looking to expand should evaluate consolidation opportunities to enhance their service offerings and drive efficiency.
• Capitalize on Social Commerce Trends – As e-commerce integrates with social media, businesses should invest in social commerce strategies to capture consumer spending shifts.
• Stay Ahead of Industry Disruption – With continued transformation in marketing technology, businesses must remain agile, embrace new platforms, and leverage data-driven insights to maintain competitiveness.

Conclusion

The marketing services industry is poised for another year of growth in 2025, fueled by AI advancements, digital expansion, and increased M&A activity. Companies that adapt to these changes, invest in emerging technologies, and adopt integrated solutions will be well-positioned to thrive in this evolving landscape.

For further information, please contact Hugh Boston or Marcus Anselm.

¹ Winterberry Group, UK & US outlook for advertising, marketing & data (Feb-25), ² Bain & Company, For Marketers, Generative AI Moves from Novelty to Necessity (Feb-25), ³ Statista (Jul-24), ⁴ eMarketer, ⁵ Pitchbook

The rapid evolution of AI-driven zero-click search* is disrupting digital marketing, with major implications for performance marketing agencies. As search engines increasingly provide direct answers to user queries, traditional models reliant on SEO, PPC, and affiliate traffic are under pressure. Yet, while this shift presents challenges, it also unlocks opportunities particularly for social-first agencies and those adapting to AI-driven strategies.

*Zero-click search refers to a search engine result where the user’s query is answered directly on the search results page without requiring them to click on a website link. This often happens through featured snippets, knowledge panels, or AI-generated responses, reducing organic traffic to external sites.

The Rise of Social Media and Influencer-led Marketing

The decline of traditional search-driven traffic is accelerating the acceleration of social media and influencer-led marketing. Platforms such as TikTok, Instagram, and YouTube are increasingly serving as primary channels for product discovery, predominantly among younger demographics.

• Influencer marketing is poised to benefit as AI-driven search struggles to replicate the trust and authenticity of personal recommendations.
• Social-first brands will thrive by leveraging video content, user-generated posts, and AI-powered ads targeting to capture consumer attention.
• Programmatic and performance-based social advertising will see increased investment as brands diversify away from search-dependent models.

Opportunities for Traditional Performance Agencies

While SEO and PPC face headwinds, agencies that embrace AI-driven search and first-party data strategies can maintain their competitive edge, including the following:

• AI-Optimized Advertising: Google’s Performance Max and dynamic search ads offer new ways to reach audiences, even as traditional search ads decline in effectiveness.
• First-Party Data and CRM: With less reliance on search traffic, brands must prioritize direct customer engagement, loyalty programs, and personalized marketing.
• AI-Friendly Content and Structured Data: Optimizing for AI-powered search responses through structured data and authoritative content can sustain visibility.

Adapting to the Future

The age of zero-click search is here, forcing a strategic shift in performance marketing. Social-first agencies are well-positioned for growth, while traditional players who embrace AI, first-party data, and evolving ad formats will continue to thrive in this new digital landscape.

Recent Market Activity: A Shifting Investment Landscape

With deep industry expertise, JEGI CLARITY remains at the forefront of digital marketing M&A, guiding Global Corporates, Challenger Agencies, and Investors through an evolving landscape. Our recent transactions highlight the increasing demand for AI, data-driven marketing, and social-first strategies:

• Bridgepoint’s investment in SAMY – reinforcing the rise of social-first marketing agencies.
• LDC’s investment in PreciseTV – reflecting the shift toward video-led discovery and targeted advertising.
• ECI’s backing of Croud – emphasizing AI-powered advertising and first-party data strategies.
• The sale of Strategus to CIVC Partners – underscoring the growing demand for data-driven CTV solutions.

These deals signal a clear industry pivot toward AI integration, automation, and audience-first marketing. As digital discovery evolves, businesses that harness AI-driven search, social engagement, and data intelligence will shape the next era of marketing success.

Click below to explore each transaction. For further information, please Contact us.

In our most recent Power of 3 series, Jonathan Davis and Hugh Boston,  ask three questions to three leading executives across the digital marketing services landscape.

This series features Juan Andres Elhazaz, CEO of SAMY Alliance, Alex Langshur, CEO Americas of Incubeta, and Glen Hartman, CEO North America of JAKALA. A big thank you to all the participants for their involvement.

Here we share some of their collective thoughts on the trends and opportunities ahead for the global digital marketing industry.

Back to business fundamentals & strategic optimization

Alex Langshur of Incubeta emphasizes the importance of focusing on core business fundamentals—people, clients, operations, and financials—before refining strategy. He compares leadership to a pilot navigating an emergency, prioritizing essential controls.

AI as the future of digital marketing & business growth

All three CEOs stress AI’s transformative role across their industries. Langshur sees AI as the biggest growth driver for Incubeta, beyond creative applications. Hartman of JAKALA highlights AI-driven personalization and machine learning as key differentiators, while Elhazaz of SAMY Alliance notes AI’s role in shaping audience behavior and content trends.

M&A as a growth lever

Each company is expanding through acquisitions, targeting firms with strong data, AI, and specialized platforms expertise:

• SAMY Alliance sees M&A as one key lever to achieve their vision of becoming a global and independent leader in social media marketing. They look for social-first companies with recurring revenue, data-driven capabilities, and ambitious leadership.
• Incubeta seeks companies excelling in data/analytics, platforms specialization, scalable AI-driven processes and able to do digital creative optimization at scale.
• JAKALA prioritizes firms that are strong in AI, machine learning, and retail media, particularly in North America.

The need for market differentiation

Hartman of JAKALA critiques the “sea of sameness” in marketing services and stresses the need for unique value propositions. He champions “The Big Integration”—aligning strategists, data scientists, creatives, and media experts to focus on end-customer outcomes rather than traditional client metrics.

Social media & commerce as a core marketing channel

Elhazaz of SAMY Alliance emphasizes the dominance of social media in modern marketing, with brands leveraging platforms for audience insights, trend detection, and authentic engagement. He foresees social commerce as a major growth area.

Conclusion

These leaders share a common vision: leveraging AI and data-driven strategies, scaling through strategic acquisitions, and differentiating their services to stay ahead in a competitive digital landscape. While their approaches vary, their focus on innovation, optimization, and integration reflects the future direction of digital marketing and business transformation.

Please click here if you would like to access the videos. Alternatively, if you want to learn about this series or the market more broadly, reach out to us at  Contact us. 

Digital Marketing Services | The Investment Opportunity

After facing challenges in previous years, the digital marketing services industry is experiencing renewed optimism, with social and influencer marketing consistently outperforming the broader sector. As a result, agencies are actively pursuing M&A, enhancing integrated capabilities, and leveraging AI and data analytics to drive growth and capitalize on market tailwinds.

In our latest Power of 3 series, we interview leaders from across the global digital marketing services industry to hear how they are staying ahead in an increasingly competitive and buoyant market. We explore their outlook for the year ahead, the key opportunities for their businesses—including from an M&A perspective—and their top priority areas for growth.

Full Interview Below

A view on North America by Wilma Jordan

The interest rate cuts in the latter half of this year, along with the possibility of more cuts in 2025, should help fuel deal making and work wonders in reducing the buyer/seller valuation gap that created a two-year bottleneck for deals getting done. Thus, we anticipate this discrepancy between what sellers want and buyers are offering will dramatically narrow in 2025.  Companies emerging from 2024 and poised to show strong revenue growth and expanding margins for 2025 will be rewarded with improving EV multiples and an eager pool of financial and strategic buyers, if and when they go to market.

In the past 18 months, we have seen a vastly reduced number of PE exits due to this very subdued buyer’s market.  The mountain of dry powder among private equity firms in the US has reached record levels. Many PE portfolio companies are well past their natural holding periods; these companies either need to be aligned with adjacent players to create synergies, or divested to other companies that can fuel their growth. The combination of dry powder, increased holding periods, and lower interest rates should result in increased PE activity in North America, while well-stocked corporate coffers will also help fuel very healthy buyer competition for prized assets.

Meanwhile, we are well into the first wave of AI anticipation, investment, and realization. Companies and investors alike have come to appreciate that well-designed and purposeful AI tools can be highly effective in complementing and evolving existing business models, rather than posing a near term threat of disintermediation. Business owners are increasingly aware that the only moats they can build around their businesses will result from going deep into a vertical and owning that market.

All these factors will make for a healthier M&A environment in 2025, boosting confidence and sparking a high level of enthusiasm among both buyers and sellers for getting deals done.

A view on the UK by Richard Vaughan

The Bank of England’s interest rate cuts in the latter half of 2024 – and the potential for further reductions in 2025 – are expected to be a key driver in reviving deal activity. Lower borrowing costs should help narrow the valuation gap that has hampered deal-making over the past two years, encouraging both buyers and sellers to align on price expectations.

Private equity activity in the UK is also showing signs of pick up as we head into 2025. The prolonged period of muted exits and subdued deal flow has created a backlog of PE portfolio companies that are overdue for divestment. With dry powder in the UK and European markets at record levels, alongside improved market conditions, PE funds are well-positioned to capitalize on opportunities in 2025. Simultaneously, corporates with robust balance sheets are expected to fuel healthy competition for high-quality assets, intensifying the demand for attractive opportunities.

We also expect cross border transactions to remain an important driver of activity in 2025 – in 2024 cross border M&A activity involving UK targets increased ~15% vs recent years. Some of that is a function of currency movements but equally a function of economic growth and confidence in key global markets, predominantly the US.

The above is certainly reflected in our own pipeline of business where we have seen a marked pick up in new pitch activity in late Q3/Q4. Many businesses we talk to have been head down for much of 2024 ensuring a return to normalized revenue growth and margin expansion and with that hard work done are now feeling more confident to start strategic conversations.

As we look ahead, we are optimistic on the UK M&A market in 2025 certainly vs 2024 and 2023. Both buyers and sellers are entering the new year with a renewed sense of enthusiasm backed by more confidence in the deal-doing environment.

A view on UK Private Equity by Marcus Anselm

Private equity exits have slowed since 2021, while unrealized assets under management (AUM) have risen to £307bn by 2024. This has heightened pressure from limited partners (LPs) on general partners (GPs) to accelerate distributions, as echoed by an EY survey revealing over 80% of GPs face at least moderate pressure from LPs to boost distributions.

Secondary markets have provided some relief, attracting record investment to create liquidity solutions. Meanwhile, the market remains flush with £139bn in dry powder, ensuring ample capital for deal making in 2025.

The fundraising landscape has been mixed. Mid-market fundraising dipped to £7.9bn in 2023 but rebounded to £10.3bn by September 2024. To sustain investor confidence and attract new capital, private equity firms must deliver strong returns—a factor likely to drive exits and deal activity in 2025.

During the year ahead, we’re expecting to see businesses with diverse leadership teams or a measurable sustainability or social impact story increasingly becoming attractive to private equity investors. A McKinsey report predicts that by 2030, nearly half of UK private equity investments could be classified as sustainable, underscoring the importance of these trends.

Artificial intelligence is reshaping private equity too. Bain research shows 20% of portfolio companies already generate measurable value from AI, with a further 32% of portfolio companies in the development stages. By 2025, deals leveraging AI strategies could deliver extraordinary returns, with 57% of investors anticipating significant value creation within five years. AI is also transforming due diligence, as 70% of investors report walking away from at least one transaction due to AI-related concerns. Currently, AI is considered in 30% of due diligence processes, a figure expected to double by 2027. However, a gap remains between investor expectations and companies’ AI readiness. Our role as advisors is helping to bridge this divide through early preparation with owners and deeply understanding the priorities of the investors.

With favourable market conditions, a surge in bolt-on acquisitions, and mounting pressure to deploy capital and for liquidity, 2025 could well mark a turning point for private equity. For owners, aligning with market trends and leveraging experienced advisors will be key to standing out in an increasingly competitive landscape. Meanwhile, the integration of AI and sustainability themes offers significant opportunities for forward-thinking investors and portfolio companies.

A VIEW ON VENTURE CAPITAL BY SAN DATTA

From an investor perspective, the market has remained equally difficult. From a fundraising perspective, global ventures funds raised $83bn by Q3 2024, down 13% on the same period in 2023, while from an exit perspective, over 20% of funds said exits were their number one challenge. Unsurprising given a difficult exit environment resulting in exit volumes being down close to 60% against the same period in 2021, and 20% lower against 2022. From an internal perspective, many investors also continued to face difficult repricing discussions and hard conversations with management teams and other shareholders.

Looking into 2025, we feel much more positive about the outlook on both a macro and micro basis. It feels like we will see an increasing bifurcation between the real winners who have shown they can either deliver or return to proper growth, and those which while they have battled through, are left in a more stable but fundamentally low growth state. For the former, they really will have a strong set of options ahead of them.

Large cap enterprise software players’ balance sheets, particularly in North America, remain very well capitalized, and they are keen to buy growth and capability, while many of the sponsor backed software platforms have now got their houses back in order and have returned to the acquisition trail. For the latter, as internal capital structures get resolved and valuation expectations align around buyers and sellers, there will also be increasing exit options for these players.

If you have any queries or would like to have an in depth discussion on this article or the broader market please Contact us.

M&A activity in digital marketing services is accelerating, as we anticipated in July, read full article here. Over the past two quarters, deal volume exceeded the quarterly average of 300 transactions over the last 7 years.

Notable deals, such as ECI’s acquisition of Croud, advised by JEGI CLARITY, highlight this trend. Looking ahead, we expect 2024 M&A levels to align with 2023, following the record-breaking momentum of 2021 and 2022.

M&A Activity in Digital Marketing Services since 2010:

*Source: Pitchbook Financial Database

While global M&A saw a decline in 2023-2024, valuations for high-quality digital assets remained resilient. The median EBITDA multiple since 2023 has remained around 13x, aligning with the long-term median of 13.4x, reflecting strong investor confidence in well-positioned, scaled assets.

EV/LTM EBITDA for Select Transactions since 2010:

PRIVATE EQUITY (PE) HAS AN ACTIVE ROLE IN DRIVING SECTOR CONSOLIDATION

PE represented 32% of YTD M&A activity in digital marketing services, with notable transactions like ECI’s investment in Croud, as mentioned earlier, Bridgepoint’s investment in SAMY and Alaris Equity Partners’ investment in Shipyard – all advised by JEGI CLARITY, demonstrating PE’s active role in driving consolidation. Key attractions for investors include the market’s impressive growth prospects – with the market projected to increase from £4.3bn in 2023 to £14bn by 2032 (CAGR of 14%), and the buy-and-build opportunity presented by the fragmented landscape.

DIGITAL MARKETING GROWTH FUELED BY NEW CHANNELS AND INCREASING DATA COMPLEXITY

The growth expected for digital marketing services will be driven by CMOs’ increasing emphasis on data-driven strategies and the shift toward digital engagement across a rapidly evolving landscape. Emerging channels such as CTV, Retail Media, and Social Commerce introduce added complexity, making agency expertise invaluable as brands navigate targeting and personalization. Privacy regulations are further constraining data visibility, increasing brands’ dependence on agencies to leverage advanced targeting solutions effectively. Growth in paid media and programmatic is expected to remain strong, with hyper-growth expected in these new channels.

INVESTORS ARE GROWING COMFORTABLE WITH GENERATIVE AI (GenAI)

Investors are increasingly comfortable with GenAI’s impact on the agency model, seeing parallels with the evolution of digital and programmatic advertising, which added complexity to media buying and increased reliance on agency expertise. As with the rise of programmatic, AI enhances agencies’ roles in defining data-driven audience groups and personalizing campaigns. By leveraging AI to optimize media spend across channels, agencies are positioned as crucial partners in navigating a more intricate advertising landscape, using advanced tools to deliver highly tailored, effective omnichannel strategies.

SCALE AND EXPOSURE TO TIER 1 MARKETS ARE KEY VALUE DRIVERS IN DIGITAL MARKETING SERVICES M&A

Valuations in digital marketing services are influenced by several key factors:

• Differentiated Proposition: Agencies with scalable, Tech and AI-driven, or specialized services command higher valuations.
• Scale: Our data suggests that size matters when it comes to valuation, with larger assets, EBITDA over £12.5m, trading at a median multiple of 16.5x, while smaller assets, EBITDA between £4m and £7.5m, trade at a median of 10.8x.
• U.S. Revenue Exposure: Higher U.S. revenue draws N. American PE interest (directionally >25% of revenues), creating competitive tension, in turn driving valuations.
• Strong Financial KPIs: attractive revenue growth, healthy margins, and strong client retention are critical for driving valuation multiples.
• Evidence of integration in Buy-and-Build: For companies following a buy-and-build strategy, effective and successful integration of acquisitions is a key value driver.

EBITDA range vs EBITDA multiple for Select Transactions:

CONCLUSION

M&A GROWTH EXPECTED TO BE DRIVEN BY ECONOMIC RECOVERY, PE EXIT AND DEMAND FOR SPECIALIST SKILLS

Looking ahead, we expect M&A activity in digital marketing to increase as economic conditions improve. Private Equity funds will likely continue deploying capital and exits will accelerate considering current hold periods. On the trade side, large agencies, driven by client demand, are likely to continue acquiring digital capabilities that are difficult to build internally.

Over the next 18 months, several PE-backed digital marketing groups across Europe and the US, held for over four years, are likely to come to market, including the likes of Labelium, Jakala, IDHL, Adswerve, Plus Company, and Tinuiti. Additionally, we foresee some consolidation among large PE-backed platforms across Europe, as agencies look to broaden geographic reach and potentially achieve the scale required for public listings.

The U.S. digital marketing services industry faced challenges in 2023, but it has seen a return to optimism in 2024. Agencies are pursuing M&A, building integrated capabilities, and leveraging AI and data analytics to drive growth and benefit from underlying market tailwinds.

JEGI CLARITY and CIL have conducted a survey of leading independent businesses across the U.S. digital services market to understand their outlook for 2024-25 and what opportunities they see for the year ahead.

The survey focused on three areas:

• Market conditions: How demand for services has changed in H2 2023 and H1 2024, and likely areas for growth into 2025.
• Industry trends: Specific initiatives digital marketing agencies are taking to drive top-line and bottom-line growth and benefit from market tailwinds.
• M&A outlook: Which areas are going to be the focus for investment and the outlook for M&A.

If you would like an in depth discussion on this topic please contact us. If you have any issues receiving the report, please contact Kelsey Kovachik at kkovachik@jegiclarity-us.com.

Author: Scott Mozarsky (Managing Director, US)

At JEGI CLARITY, we have observed strong growth across the majority of subsegments of the legal sector, including litigation support; the market segment for our two latest deals, the sale of litigation support services provider First Legal to Aurora Capital Partners and the sale of Counsel Press to Align Capital Partners. The litigation subsegments of the Legal Tech and tech-enabled services market have an aggregate TAM of over $50B which includes eDiscovery, litigation support, legal research, legal practice management software and litigation workflow platforms.

The Legal Tech market’s growth is driven by technological disruption, increased access to capital and the emergence of alternative business models. These factors are creating a fertile environment for investors and expanding deal opportunities in the market.

Market Drivers

2023 marked a year of solid growth for Artificial Intelligence (AI), with Generative AI becoming more mainstream. While 2023 focused on theoretical advancements and proofs of concept, 2024 has seen the emergence of tangible AI applications and their integration into organizational operations. Although AI’s impact on the legal industry will be profound, it is still early. AI is maturing and evolving every day.

As AI adoption has increased, several companies and financial sponsors have focused on leveraging AI to differentiate tech-enabled service offerings, which in some instances is enhancing value and profit margins in what historically were commoditized markets.

AI has served as a catalyst for technological innovation in the sector. This innovation includes AI generated transcriptions for court reporting and depositions and workflow improvements relating to document automation. AI is also being used to highlight inconsistencies in testimony in real-time during hearings and depositions for attorneys to enable them to better serve their clients. Another area that is gaining momentum is law firms leveraging AI for predictive analytics relating to likelihood of winning cases and size of potential settlements and damages awards.

The alternative legal services provider market segment continues to exhibit solid consistent growth driven by increased adoption by law firms and in-house groups. Investments in legal operations, technology as well as Legal Process Outsourcing (LPO) and Business Process Outsourcing (BPO) providers have generated strong momentum over recent years.

The recent loosening of restrictions on nonlawyer ownership of law firms under Rule 5.4 in Arizona and Utah has also stimulated activity and served as a catalyst for financial sponsors to come into the market. Some financial sponsors are deploying capital into law firms through managed services organizations similar to the patterns we have seen in the medical, dental, and tax & accounting verticals.

M&A Overview

Despite a choppy M&A market in 2023, the legal market was highly active for tech-enabled services deals, particularly in litigation support. Notable deals included the sale of JEGI CLARITY-advised Counsel Press to Align Capital Partners with the shared vision of building a diversified litigation support platform, as well as Gridiron Capital acquiring Esquire Deposition Solutions, Veritext acquiring Litigation Services and GCP Capital Partners acquiring KCC. Other legal market tech-enabled services sub-segments were also quite active including legal process outsourcing led by Consilio’s acquisition of Lawyers On Demand, and business process outsourcing led by Renovus Capital continuing to create a market-leading global platform at Harbor Global.

Legal software market deal activity was less consistent in 2023. That said, several marquee businesses were acquired at strong valuations including, among others, Casetext, Fastcase, Aosphere, Elite, Litify and Cipher. While the broader software market has not come back to the same consistent levels of activity and high valuations that we saw in 2021, quality businesses in the legal market are trading for strong valuation multiples.

We anticipate this trend to continue into 2024 and beyond.

2024 has seen multiple subsectors experiencing heightened M&A activity including litigation support, claims administration, alternative dispute resolution, legal process outsourcing, eDiscovery, and IP management. A consistent theme in the deals that have closed and the other deals in market is a focus on leveraging technology and AI in particular to drive better results and efficiencies.

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.  

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