Opportunities Abound.. For Now

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The first three quarters of 2007 point to a year of significant M&A activity in the digital marketing and media world. As mainstream marketers and their Madison Avenue partners allocated a considerable amount of their budgets to online efforts, the scale tipped – in a big way. This tipping point validated what many of us have known for years: the fusion of technology and media offers huge opportunities to market efficiently and effectively, generate leads, and build strong communities.

With marketers finally spending significant amounts on their digital marketing and media campaigns, the appetite of marketing/media providers for new product and service offerings is spurring a flurry of acquisitions. Most of these at premium pricing, as profitable strategic players spend to be “in the game” and some spend even more to own Boardwalk or Park Place.

Examples include:

  • Yahoo’s acquisition of BlueLithium
  • AKQA’s acquisition of SearchRev
  • AOL’s acquisition of Tacoda
  • Google’s acquisition of Adscape
  • WPP’s acquisition of 24/7
  • Microsoft’s acquisition of aQuantive

These marquee transactions have sparked a series of mid-market transactions, where deals tend to be much less leveraged and the much-ballyhooed credit crunch is much less pronounced.

As companies work to absorb their recent and current acquisitions, and integrate their new product and service offerings, the ranks of potential acquirers (especially those wiling to pay a premium) may thin in the year ahead. The current market still offers plenty of opportunity for sellers of best-of-breed media, marketing and enabling technology.

Today, multiples and valuations are at or near historic highs, major strategic acquirers are still in growth mode, and the recent cut in the cost of capital may stimulate their appetite in the months ahead. But this window won’t stay open forever.

Privately held businesses are likely to face stronger competition from the newly enlarged powerhouses, and to feel a disproportionate share of the pain if the economy slows. Independent companies that offer digital marketing, media and the services and technology that support it are considering their strategic options now, while conditions in the current business cycle remain favorable.