MediaMath is in talks with several parties about a possible exit with a number of potential outcomes including a Magnite group or a private equity group that would end up as eventual buyers of one of the most popular names in advertising technology, according to the sources.
MediaMath, a private buy-side buy-side group, and Magnite, a Nasdaq-listed seller group originally known as the Rubicon Project, were established in 2007, and the potential union of the two would mark a major consolidation step in the advertising technology sector.
Although MediaMath appears to be keeping alternative options on the table with buy-side leadership reportedly hinting that it is simultaneously exploring the option of refinancing or selling to private equity in recent weeks, sources told DigiDay.
When given the opportunity to comment on the accuracy of reports that she was recently in negotiations with MediaMath, a Magnite spokesperson said she does not comment on rumors or speculation.
Similarly, a MediaMath spokesperson claimed that it did not comment on rumors or speculation when presented with details of recent allegations by Digiday.
In June 2020, Digiday reported that MediaMath had appointed investment bank Centerview Partners to explore its strategic options that could include a potential debt restructuring program or sale. It has since emerged that MediaMath has teamed up with LUMA Partners, the premier investment bank for ad technology exits, to explore its options once again.
According to sources familiar with the process, a memo circulated to potential buyers in mid-2021 stated that total spending on the MediaMath platform was approximately $591 million in 2020, 70% of which was in the United States, and 60% of which came directly from brands. .
“We are an ad technology platform with a global presence serving the most sophisticated brands and their agencies, helping them future-proof their digital advertising investments and improving the return on their ad spend,” said a statement attributed to Konrad Gerszke, President of MediaMath, with DigiDay partnering.
He continued, “As such, we are always looking for ways to deepen our relationships with a coordinated group of data, technology, logistics and financial partners – including Magnite, which has been a long-standing partner and part of our SOURCE ecosystem – in order to enhance the solutions we provide to our customers.”
So far, MediaMath has raised $607.5 million, according to Crunchbase, with the latest $225 million funding round from private equity firm Searchlight Capital Partners in 2018. At the time, this funding round was reported to value the company at north of $1. Billion.
For now, there is little certainty, but it has been understood that MediaMath and Magnite have been negotiating the final cost of the exit in recent weeks, according to a source who declined to be named due to ongoing business relationships with both companies.
A separate source familiar with current events at MediaMath, who similarly declined to be named due to ongoing relationships with MediaMath, told Digiday that the company sought refinancing earlier in the year. From this process, discussions arose about a possible sale of the private equity group.
A thriving but competitive sector
MediaMath operates a demand-side platform and a data management platform, tools that are in demand in a segment of the advertising business where spending is expected to grow from $192 billion in the United States this year to $278 billion by 2024, according to eMarketer.
In recent months, MediaMath has strengthened its global presence by forging key partnerships in the Indian subcontinent and Japan along with key appointments in Europe, the Middle East and Africa. Most recently, it announced the appointment of Marie Mathias as Vice President and General Manager for North America.
However, it operates in a very competitive space where it competes with the likes of Google’s DV 360 and The Trade Desk for media budgets – although the latter is a buying tool for agencies while MediaMath tends to work more directly with brands.
Additionally, the fundamentals of advertising technology are uncertain as the entire digital media ecosystem is looking for alternatives to third-party cookies before Google’s planned end to its ubiquitous ad targeting tool in 2023. Meanwhile, the specter of privacy laws such as GDPR looms large over the entire advertising industry. The potential impact of such legislation on future earnings is likely to be most prominent in any due diligence process.
However, deals are being struck as ad technology companies seek to scale up, shift to a business model that facilitates better first-party relationships, or seek a moment of liquidity either by debuting in public markets or by selling with equity groups. increasingly private. Prospect.
In its latest market report, LUMA Partners noted how deal-making permeated the space last year after activity stalled during the early stages of the Covid-19 pandemic and that there are now 23 ad tech companies listed on the stock exchange as of Q4 2021.
The consortium of Magnite and MediaMath, two front-runners in the early ad technology scene, would likely have USP as a full-fledged independent ad group, particularly in the CTV space, which would potentially ensure better transparent pricing for advertisers – a key component of the MediaMath SOURCE entrepreneur.
Magnite has made the bulk of its CTV investments in recent years — Telaria, SpotX and SpringServe — adding a buy-side tool that could be one of the few, if not exclusive, access points to its inventory that could lure advertisers eager to lower their advertising technology fees. Think about how Walmart worked with the commerce desk, or why Roku spent $150 million on DataXu.
The potential addition of a DSP like MediaMath to any sale-side offering would not only bring “serious demand-side business,” said Ratko Vidakovic, founder of ad tech consultancy AdProfs, but in the case of Magnite, it would also bring it closer to offering an integrated platform. for advertisers.
“this is [could] It gives Magnite a structural advantage because it allows the company to incentivize advertisers to use Magnite’s DSP and SSP together by offering things like lower fees, better reporting, more transparency, and log-level data.”
“While the automated supply chain is subject to extensive scrutiny for transparency and efficiency, having the shortest and most confidential supply chain between brands and publishers is a major advantage.”
Moreover, the potential coupling of the buy-and-sell side process could bring assurances about privacy compliance, according to Vidakovic. “In a world where the notion of broadcasting personal information across an ecosystem of gamers in advertising technology seems quite weak, an end-to-end solution that allows embedded companies to have a contingency plan for a future in which integrated first-party systems have an advantage over an ecosystem of unconnected third-party players “.
private equity play
LUMA Partners notes how there have been more than 10 tiered PE transactions in the sector over the past 12 months with notable examples including Vista Equity Partners adding TripleLift to its pool of ad technology assets for $1.4 billion.
Other private equity firms that have taken up ad technology in recent months include Court Square Equity Partners, which has bought Connatix in a perceived $600 million deal, and Blackstone, which has joined forces with GTCR by investing in Simpli.fi in a deal The company appreciates. 1.5 billion dollars.
Meanwhile, CVC Capital Partners and TA Associates have bought Vista Equity Partners’ stake in MediaOcean — an ad technology company acquired due to its July purchase of buy-side ad server Flashtalking for $500 million, 12 months after its purchase of 4C Insights.
Speaking with Digiday in early November about the overall dealmaking activity in the space, Elgin Thompson, managing director of technology investment banking at JMP Securities, said, “Private equity has a long way to go in advertising technology at scale.” He further noted that the growing popularity of publicly listed companies, especially now that special purpose takeovers are in vogue, could boost the investment thesis for parties interested in advertising technology.
For example, Vista Equity Partners acquired Integral Ad Science in 2018, the terms of the deal were not disclosed, and after its initial public offering in June 2021, the ad verification firm has a market capitalization of about $3 billion. Similarly, IAS rival Providence Equity Partners bought DoubleVerify for $200 million in 2017, after its initial public offering in April of this year with a market capitalization approaching $5 billion.
What’s no doubt is that deal-making activity has been frenetic over the past 12 months, and the end result of MediaMath’s decision-making process on whether to exit or continue to go it alone, perhaps under a new financial structure, will be a significant milestone in the history of advertising technology.