Power of 5: The Digital Transformation Series

“Power of 5”
The Digital Transformation Series

5 Leaders, 5 Questions, 5 Minutes

The Digital Transformation Series

Introducing our Power of 5 series. We ask 5 industry leaders 5 questions in 5 minutes to gain insight on how they are succeeding in today’s market.

In this series we focus on Digital Transformation. The rate of technological change is high and constant and global brands are increasingly looking to third party experts to help them keep up. From technology consulting to strategic marketing services, the market continues to grow and continues to focus on all things digital.

Over the next 5 weeks we will be interviewing 5 select leaders from global agencies who all serve international brands. Topics of discussion include, current challenges facing clients, learnings from 2020, and M&A criteria going forward.

In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.

Jeff Bezos, Executive Chairman, Amazon

Speakers

Dan Gilbert, Global CEO, Brainlabs
Rob Pierre,
Co-Founder & CEO, Jellyfish
Zach Morrison,
CEO, Tinuiti
Wendy Clark, Global CEO, Dentsu International
David Jones, Founder & CEO, You & Mr Jones

Full Interviews Below

Dan Gilbert speaks with Jonathan Davis
Rob Pierre speaks with Marcus Anselm

Content and Commerce. A Perfect Storm

Content and Commerce. A Perfect Storm.

Key Highlights

Global E-commerce Market Continues to Grow and Attract Record Investment

27% global e-commerce market growth in 2020 up to $4.3tn total global revenue

$35bn invested globally in 2020 across the e-commerce sector

133% increase in total investment on prior year

e-commerce Content is Becoming Increasingly Vital

The global Product Information Management (PIM) market will be $16bn in 2025, growing at a CAGR of 12.2%

80% of purchasers have abandoned transactions due to poor product content

58% of shoppers place the blame on not having enough information

12-36% increase in shopper conversions with rich product detail pages than those without


E-commerce Growth Outpacing Overall Retail

E-commerce growth continues to far outpace overall retail growth with penetration rates approaching 20% this year aided by  improvements in the quality of online shopping experiences.  These improvements have come about due to record levels of investing across the e-commerce category, massive spending by brand and merchants on e-commerce infrastructure, storefronts and content, and continued innovations in digital and DTC marketing.  

Covid-19 has only served to accelerate e-commerce adoption permanently, further fueling investments in technology, content,  features and functionality. 

99% of Business Leaders believe that quality product content is important to sales growth through digital channels
source: eMarketer

Massive Brand Spend Shifting to e-commerce Execution 

While the e-commerce experience might seem simple and fluid from the consumer perspective, successful e-commerce execution is extremely complex.  Media spending, customer acquisition, offer and inventory management, visual merchandising, payments, CRM, product information, reviews and referrals, fulfillment, reverse logistics, and, of course, site performance … each of these individual areas of e-commerce execution are major pain points for brands and merchants alike.  Each of these elements must connect to others, and many are through third-party vendors.  They all must work in concert, in multiple languages and currencies, with the most up to date and real-time SKUs, pricing, specs and availability across many different e-commerce marketplaces and retailer websites.

Content is King”… Especially In E-commerce

Across the e-commerce journey, there is one critical constant:  the need for accurate, rich and informative product content.  Product content is comprised of many parts from brand compliant product images and logos to rich media such as video to the detailed product information (SKU, specs, descriptions, and other technical identifiers).  The volume and makeup of this content is continuously increasing and must be consistent wherever it appears as a marketing asset – Brand sites,  Search results,  Landing pages,  Comparison shopping sites,  Channel partner catalogues,  Review sites,  Social sharing and  Customer care among others.  All rendered dynamically, often personalized, and always on-demand.   

The largest retailers and online marketplaces require up to date and accurate product info and rich content for their real-time execution. The cost burden is shifting to brands and is requiring significant upfront investment to succeed online.

New Technology Providers Replacing Legacy Solutions

Against this backdrop, an entire ecosystem of Product Content specialists have emerged, spanning high-volume, global creative production studios to purpose built Product Information Management (PIM), Digital Asset Management (DAM) and Content Management Solutions (CMS) providers who aggregate and syndicate millions of product content assets required to keep e-commerce running.

An Active Market With Significant Investment And Consolidation

This sector has been incredibly active from an investing and M&A perspective as brands and merchants further invest in their e-commerce capabilities to meet the ever-increasing demand for flawless e-commerce experiences.

Select Financial Investor Activity

In Summary

As brand spend shifts to e-commerce execution, the wave of investment and consolidation in content technologies and solutions that drive discovery, conversion and retention will continue.  Success will be characterized by players with  the right capabilities to manage and automate delivery across an increasingly fragmented landscape.   


CASE STUDY – CNET Sale to 1WorldSync

  • JEGI CLARITY advised Red Ventures on the sale of CNET Content Solutions (CCS) to 1WorldSync, a portfolio company of Battery Ventures 
  • CCS is a leader in the exchange of product information, rich content and eCommerce solutions that powers ecommerce sites from SMB to Enterprise 
  • Eight weeks from engagement to announcement, commencing several weeks prior to the closing of the acquisition of CNET by Red Ventures 
  • Combines two powerful platforms to provide brands and retailers with end-to-end product content solutions, from supply chain data to rich content that powers e-commerce

Media, Information & Technology: Public Market Perspectives

Media, Information & Technology: Public Market Perspectives

We have conducted analysis on the public international media, information and technology equity markets to explore how the broader segments and underlying sub-sectors have fared in terms of valuation and profitability YTD.

We have also analysed how businesses are viewing 2021 in terms of revenue growth projections and recovery.

Key Takeaways

Total equity market value up by 8% since January 2020
The Media, Information & Technology public equity markets continue to perform strongly, with total market value up by 8% since January 2020 against a backdrop which has seen other  benchmark indices fall 5 – 15%.

2020 EBITDA outlook revised down by aggregate $65bn
This growth in total market value has been achieved despite uncertainty around 2020 outlook which currently shows a material decline in the 2020 earnings; notably current. 2020 EBITDA market estimates have come down by $65bn since January 2020.

Average 12% revenue growth forecast for 2021 across sectors
From a valuation perspective, it feels clear that investors are looking through the 2020 numbers and pricing in strong recovery across virtually all sectors, with 12% total market revenue growth forecast for 2021.

From an M&A perspective, whilst the valuation environment remains opaque, it is clear that the strong stock prices which many corporates have sustained through this period will be highly relevant in terms of deal pricing, consideration, and structure.

To access the full report click here

Global Corporates M&A Survey

Global Corporates M&A Survey


 

We have spoken to senior executives at approximately 30 global corporates in the Media, Information, Marketing, Software and Tech-enabled services sectors to gain insights as to the impact of the Covid-19 pandemic on their M&A activity over the short to medium term.

Q&A Summary

1 Will you remain active in M&A over 2020?

60% of corporates we spoke to are likely to remain active throughout 2020 Uncertainty around the timing of a return to “normal” economic activity, however, will undoubtedly impact their M&A volume, at least for the next few quarters.  

For some, M&A will continue to be a key part of their strategy, while for others, a potentially less competitive M&A environment will allow them to be more opportunistic. 

 

2  What impact do you expect to see on valuations across your sector? 

Two-thirds of respondents expect a softening in valuations, while one-third don’t expect much change This expected decline will be due to both a reduction in multiples as well as the underlying metric they are applied to. However, valuation for strategic and premium assets is likely to see less of an impact.  

3 Will current events change the way you structure M&A transactions?

Corporates were unanimous on the fact that the pandemic would impact how deals are structured At least in the short to medium term, the increased volatility has led acquirers to revisit the way their deals are structured, either as a way to bridge valuation gaps and/or to de-risk transactions. Several alternatives are under consideration and acquirers will be assessing their approach on a case by case basis.  

4 How will you approach valuation given near term uncertainty created by Covid-19?

Respondents suggested that they will approach valuation case by case and look at a combination of metrics Corporates that continue to pursue M&A will be re-looking at the way they approach valuation, particularly for those assets impacted by Covid-19. 

In Summary

The Covid-19 pandemic, with its unprecedented lockdown measures, has unsurprisingly impacted M&A activity around the world. In the sectors we cover, activity for April and May was down c.50% on the prior year. However, deal activity is yet to hit the monthly nadir seen during the 2008 crisis. Though volumes will be down, for the large part, respondents to our survey confirm that they will remain active acquirers in the short to medium term. While many will be opportunistic on where they focus their attention, others will see more focused M&A strategies given the competing use of capital.  

Early indications are showing that valuations and deal structures are being impacted to take into account near-term uncertainty, with both acquirers and sellers being more flexible and creative to get deals over the line. Further, premium assets in markets with predominantly strong tailwinds are still highly sought after and therefore less likely to have their valuations impacted. 

While volumes will likely remain low for Q3, anecdotal evidence suggests that deal pipelines are building towards a more active final quarter 2020 … watch this space! 

To access the full report click here

European Private Equity Survey: market views in turbulent times

European PE Survey: market views in turbulent times

In light of the rapidly changing market environment following the Covid-19 outbreak we have spoken to over 20 UK and European Private Equity firms, across the mid-market, to gain insights as to the impact of this pandemic as well as to understand investment appetite over the short to medium term.

Q&A Summary


1 How is your portfolio performing given the current economic climate?

Overall media, information and technology-led businesses are holding up with the exception of those businesses directly exposed to challenged end-user markets and those reliant on in-person engagement for delivery of their solution.

More broadly, whilst there is a recognition that 2020 will be difficult on multiple fronts, over the medium term the underlying tailwinds across the sectors should drive recovery and growth   

2  Where do you see opportunity to deploy capital over the next six months? 

Capital deployment in the near term is likely to focused on three areas specifically: (i) opportunity / situation investments (e.g. restructurings and turn-arounds); (ii) bolt-on acquisitions for portfolios companies; and (iii) those sectors and business models which can demonstrate resilience through this crisis.  

3 How is your pipeline of new opportunities?

Existing pipelines have largely dried up with most funds working internally on research projects towards building actionable opportunities for when the market comes back. 

4 When do you expect to make your next platform investment? 

Most funds are expecting a six-month hiatus given the uncertainty with the view being that markets will re-open in September for platform investments. A small number of funds believe that there will be opportunities which fit their profile in the next three months however. 



5 Are your portfolio companies likely to be acquisitive in the coming months? 

Funds remain open minded about add on acquisitions, acknowledging that there will be situations to add capability, scale and talent as competitors struggle. 

In Summary

Overall media, information and technology-led businesses are holding up and whilst there is a recognition that 2020 will be difficult on multiple fronts, over the medium-term the underlying tailwinds across the sectors should drive recovery and growth 

Navigating the current environment with significant amounts of dry powder is a challenge that many European private equity funds across the board are have highlighted 

In theory, a record amount of cash being available to spend should allow firms to be opportunistic. In practice however, the economic, social and financial uncertainty coupled with logistical challenges around deal execution means that new investments will be very difficult to execute in the near-term 

Having said that, in the last week alone we are now seeing private equity funds start to put their heads above the parapet and look to future investments rather than inwards at their portfolio and we expect this trend to continue over the coming weeks to ensure they are able to act quickly when the market “reopens” 

To access the full report click here

H1 2019 Sector Review: Marketing Services

H1 2019 Sector Review: Marketing Services


We examine H1 2019 M&A activity in the Marketing Services sector, a recap of recent JEGI CLARITY transaction activity in the Marketing Services sector as well as recent news and events form across the firm.

The buyer mix is increasingly diversified

Accenture were the most active acquirer in H1, announcing 7 transactions in H1 2019 compared to 4 in H1 2018, which included the acquisition of Hjaltelin Stahl, Denmark’s leading independent agency, a deal on which JEGI | CLARITY advised.  

Of the Global Networks, Dentsu was the most active in H1 with 5 transactions announced.  

These included the acquisition of Filter, a US based ‘in-housing’ user experience agency. Financial buyers were more active in H1 2019 compared to H1 2018, as they continue to see the opportunity to build and scale platforms. 

We expect…

The marketing services sector to remain resilient in the face of a broader M&A market slowdown, pointing to the ongoing strategic need for international buyers to build capability sets in digital, data and content. Likewise we’d expect PE activity to continue in this sector as they ride the wave of digital transformation and look to build acquisition platforms. 

To access the full report click here

Events Services in Focus

Events Services in Focus

We examine the drivers behind the Events Services market and M&A in the space; an interview with Kathleen Thomas on the Events Services sector; our experiences across Events and related services as well as other news and events.

What is the market?

The Events Services sector spans event design/creative, content development, design and fabrication, installation, digital activation as well as event logistics. 

What’s driving the market?

  1. Strong growth in the underlying events market

    • Face-to-face channel remains critical in driving ROI through engagement and transactional activity

  2. Increased event outsourcing by brands

    • Ability to produce and deliver premium, best-in-class events is vital

  3. Increasing demand for event automation

    • Broader and adjacent c.$6bn global event management software sector growing at 12% CAGR

  4. Growing need for turn-key solutions

    • Service providers differentiating through provision of end-to-end solutions to customers vs. point solutions from multiple providers

How is this impacting M&A activity?

Strategics undergo market consolidation

Event organisers are increasingly looking to be creative and deliver better experiences and ROI for all participants. In response we have seen events service providers look to consolidate what has been historically a fragmented market. Some of the key strategics such as Freeman and VIAD Corp have been highly active in recent years. 

Attractive conditions for private equity

Given the size of the market, the abundance of relatively cheap capital and the opportunity for ‘Buy and Build’ strategies, private equity remains active within the category. Examples of private equity backed platforms include Blackstone’s PSAV, EMZ and Indigo backed MCI Group, and Carlyle backed NEP.

To access the full report and Q&A click here

Private Equity in Focus

Private Equity in Focus

We examine Private Equity activity in Europe, including interviews with leading Private Equity funds Accel-KKR, Exponent, Livingbridge and Waterland.

Private Equity Activity in Europe

$222bn

Cumulative dry powder in Europe


Dry powder remains strong but with increasing capital chasing fewer transaction opportunities.

-37%

Decrease in transaction volume Q1 2018 to Q1 2019

Macro headwinds, in particular Brexit volatility and risk are slowing transaction volumes across Europe. 

53%

Proportion of total private equity investments that are add-ons in 2019

Increasingly Private Equity funds are focussed on building value in existing portfolio companies. 


“Overall, we are long the UK. Brexit has given us a more aggressive stance to deploying capital in the market.”

“At the moment we are decidedly more predisposed to business with an international footprint rather than businesses solely dependent on the UK economy and so less exposed to cyclical downturn.”

“Brexit hasn’t impacted our appetite for investing. We invest in high growth businesses in the mid-market which are often disruptive in niches and as such we are comfortable that they can grow irrespective of the political and economic situation.”

“From an investment perspective, as we do invest in the UK, Brexit has not affected our overall appetite to invest in the UK or elsewhere.”


Slowdown in new platform investments

New investment in Q1 2019 was 37% down on Q1 2018.

Uncertainty around Brexit and further macroeconomic factors across Europe have contributed to slowing transaction volumes as sellers wait to see a more stable market to transact and buyers have to work harder to navigate the investment landscape.

Increasing focus on portfolio companies:

Growing competition from US funds:

With the US markets growing ever more competitive US firms are increasingly deploying capital in European companies. 

• The proportion of total investments in European firms by US investors has increased from 16% in 2015 to 27%  in 2019 

• Decrease in the proportion of investments made by European firms from 83% in 2015 to 71% in 2019 

To access the full report click here

Q1 2019: European Media & Technology M&A Activity

Q1 2019: European Media & Technology M&A Activity

This month we examine Q1 2019 European media and technology M&A activity; current perspectives on Europe from US buyers and investors; key takeaways from Q1 activity across our sectors and other news.

2019 recorded a strong start for M&A deal activity in our sectors with 595 transactions announced in Q1. Whilst we saw a 20% drop on the previous year’s Q1 deal volume, deal value was up 20% with a total of €25.2 billion in the quarter, fuelled in part by ‘mega-deals’ including NEC’s €1.4bn purchase of Danish IT services provider KMD. 

The B2B, Media, Marketing and Information sector saw the largest deal of the quarter, a €5.7bn acquisition of Scout24, a public German-based Internet Software company, by Hellman & Friedman and The Blackstone Group. 

Consumer media and entertainment content continues to see high levels of M&A activity and peaking valuations, reflecting the shifts in media consumption as demand for content shows no signs of slowing. Roper Technologies’ €475m acquisition of Foundry. 

Key Sector takeaways:

Consumer Media & Content

Globally we continue to see high levels of M&A activity in consumer media and entertainment content, reflecting shifts in media consumption, and in turn, strategies for audience monetisation. Entertainment content remains an area where demand for video production technology and services continues to grow. 

Software & Technology

Software is still dominating transaction activity within JEGI CLARITY sectors. Notably in the US in Q1 was SAP’s acquisition of CX analytics software company Qualtrics for c$8bn for a business which generated c $400m in revenues in 2018. In Europe activity echoed this, with one example being Nordic Capital’s acquisition of business intelligence and analytics software provider BOARD International in an estimated $500m transaction.

Adtech, Martech & E-commerce

In-housing of adtech/martech and direct-to-consumer digital marketing capabilities continues to drive transactions in Q1 2019. McDonalds Corporation’s c$300m acquisition of Dynamic Yield, an AI-powered personalisation and data management platform is evidence of this. 

B2B Media, Marketing & Information

In-housing of adtech/martech and direct-to-consumer digital marketing capabilities continues to drive transactions in Q1 2019. McDonalds Corporation’s c$300m acquisition of Dynamic Yield, an AI-powered personalisation and data management platform is evidence of this. 

To access the full report click here

Digital Marketing in Focus

Digital Marketing in Focus

This month we examine the digital marketing industry including the key current drivers of growth, why brands are increasingly ‘In-Housing’ and global M&A activity in the sector.

Digital marketing growth drivers

  • c.47% of UK & US ad spend is digital, up from 17% in 2010
  • Stability in digital ad spend due to measurable ROI and CTR1
  • Digital ad prices are rising – CPM2 on Facebook from $4.3 to $9.1 and CPC3 on Google from $1.6 to $2.7 between 2015 and 2018
  • More relevant ad space is available due to media digitization
  • Consumers spend increasing time online with access to more digital
  • Tech development are opening new opportunities for digital marketing
  • Companies are developing in-house capabilities

In-housing has been a hot topic in boardrooms

Brands are seeking greater control of digital marketing as this is increasingly viewed as a sales channel as much as a marketing channel. 

Global M&A activity increasing in performance marketing

Global M&A activity in performance marketing services has increased in recent years. The growing digitalisation of media and rising digital ad costs are driving consolidation in the sector.  

• Whilst the Global Networks continue to be most acquisitive in this space, consultancies (such as Accenture) and PE-backed platforms (such as Elite SEM and Wpromote) were also prominent.  

• We expect M&A to remain active in 2019 with several acquisitions already announced including the investment in leading technologyled marketing agency, Brainlabs, by private equity fund Livingbridge (JEGI | CLARITY advised Brainlabs on this transaction). 

To access the full report click here