Category: Insights

Key Takeaways

Marketplace winners will optimize core market research while positioning for success in digital and data

Companies that can provide business leaders with agile, data-backed market analysis across media platforms are expected to be the most successful.

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M&A playing an active role

Large scale consolidation is reshaping the landscape as digital agencies, consultancies and SaaS vendors encroach on market research budgets.

Recent sector transactions

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The existing sector landscape is evolving as market players focus on new opportunities

Large scale consolidation reshaping the landscape

• Firms looking to return to growth through scale as well as bridging the current gap between research, insights, and marketing.
• Service set expansion pursued as a way to increase mind and wallet share.

Large cap Private Equity active in the sector

• Private Equity are being attracted by the sizable, fragmented, and disrupted market.
• They understand the value of research and are recapitalizing to help re-define the market for a digital era.

Key Highlights

Cash and investments held by US corporations rose 30% to $2.5T in the first half of 2020

34% of divestitures had a Private Equity buyer in 2020

9.7% annual shareholder return for companies with focused divestitures and M&A programs

Companies with active M&A programs continue to outperform inactive companies

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Corporate Divestitures Remain a Robust Part of the M&A Market; Trending Back up Post the Pandemic

Organizations tend to review their portfolios and go through corporate divestitures more aggressively post economic crises, as evidenced by strong divestiture activity post the financial crisis during 2008-2009. Given a heightened sense of risk and a desire to focus on growing core parts of their organizations, corporations are already evaluating noncore assets in order to free up cash to pay down debt, leading to uptick in the corporate divestiture activity in Q4 2020 and Q1 2021. 

Companies With Active M&A Programs Outperform Inactives

Based on total shareholder returns generated over comparable periods, companies with focused divestitures and M&A programs tend to outperform organizations that have stayed relatively inactive.

Growing role of Private Equity Players as Buyers

Private Equity firms will continue to play a substantial role in divestitures as they accounted for a record 34% of buyers in 2020. The number of private equity firms focused on carve outs and “complex” deals continues to rise.

Perils Of Holding On To Non-Core Assets For Too Long

In Summary

With Private Equity continuing to be a driving force we anticipate the market for corporate divestment activity to remain buoyant. Equally as we are still in the process of emerging from the pandemic companies will continue to need to assess how they service debt requirements. M&A should be an important part of the discussion around board tables.

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 5 weeks we interviewed 5 select leaders from global agencies who all serve international brands. Topics of discussion included, current challenges facing clients, learnings from 2020, and M&A criteria going forward.

Full Interviews Below

Key Takeaways

Total equity market value up by 3% since January 2021

The Media, Marketing, Information and Technology public equity markets continue to perform well, with total market value up by 3% since January 2021, albeit against a broader market backdrop which has seen other benchmark indices up by 7 – 12% over the same period.

2021 revenue growth of 17% across all sectors

2021 forecast revenue growth remains robust across all sectors at 17% vs. 2020, led by +27% growth across e-commerce and digital media, and in particular verticalized e-commerce and social media.

2021 EBITDA growth of 18% across all sectors

Strong outlook for 2021 EBITDA, with virtually every sector expecting double digit growth vs. 2020, other than for specific sub-sectors which continue to experience fall-out from Covid-19.

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The total market value of the Media, Information and Technology Sectors has increased by 3% since January 2021

Following strong growth in 2020, E-commerce and Software have both seen a slight contraction in total market value (TMV)

• The main drags on TMV growth through 2021 YTD have been e-commerce and Software. Whilst the growth outlook for these sectors remains positive, both sectors previously saw an exceptionally strong H2 2020, with TMV growth of 30% and 19% respectively
• Investor demand for businesses exposed digital transformation solutions and best-in-class CX is similarly reflected in TMV growth in both Tech & Consulting Services (up 6%) and Insights (up 10%)
• The Digital Media sector also continues to benefit from powerful tailwinds, including strong and growing  demand for digital engagement. It has continued to outperform, up 13% ($3,544bn of TMV) over the period

Forecast 2021 revenue growth of +10% for many sectors

• Current market forecasts show robust 2021 revenue growth across virtually all sectors, driven by powerful tailwinds across many sub-sectors and a “bounce-back” in revenues in those sectors most severely affected in 2020
• Total revenue growth from 2020 to 2021 is forecast at c.17%, representing an aggregate increase in revenues across all sectors of close to $450bn, with double-digit percentage growth expected across many sub-sectors

Driving double-digit EBITDA growth for 2021

• The strongest growth of 36% is expected for e-commerce, showing a limited correlation with the change in TMV
• Digital Media is forecast to be the second highest performer with growth of 32%, with Search and Social Media being the key drivers as both audiences and advertising dollars drive growth in the sector

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

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E-commerce Growth Outpacing Overall Retail

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

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.   

New Technology Providers Replacing Legacy Solutions

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.   

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CASE STUDY – CNET Sale to 1WorldSync

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.

To access the full report click here

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

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

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

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

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

What’s driving the market?

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