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Alternative attitudes towards M&A prevail as investors cool on the commoditized middle

Sovrn has raised $36 million, an investment that comes as much heed choppy economic forecasts and suspend earlier plans to back ad tech, a sector that has been white-hot among financiers only a year ago.

The round brings Sovrns total fundraising to $85 million, exclusive of a $30 million debt financing round this past year, with the sell-side ad tech company intent on the sum to help expand its acquisition trail six since 2014.

Participants include VC firms such as for example previous earlier backers Archer CAPITAL RAISING, Foundry, private equity outfit Lexington Partners along with Progress Ventures and Structural Capital, amongst others.

Sovrns CEO Walter Knapp claimed his company could improve the Series C round following a companys sustained profitability,including year-over-year revenue growth for days gone by seven consecutive quarters and 13 out from the last 14 quarters in accordance with a news release.

Although some say a week is really a very long time in politics, then (if true) per year can be an eternity in corporate development. And you can find few sectors of the media industry where that dynamic is more clearly on display than ad tech.

The rate of public listings in the sector this past year was frenetic with companies in the sector seemingly spoiled for choice when it found the chance to float on the stock markets. In accordance with investment bank LUMA Partners, the amount of ad tech and martech stocks traded on exchanges such as for example Nasdaq or the brand new York STOCK MARKET is currently double that in comparison to pre-Covid times.

Simultaneously, numerous PE firms were also searching for ad tech firms however the appetite among both public and private investors has waned. Most publicly traded stocks in the sector are actually trading at significantly below their launch price as the deal flow in the private sector has since slowed to a trickle.

This past year I was watching people grow no matter what and companies felt they [had to] raise a whole load of money, there is less discipline from the investment community and valuations were quite high, Knapp told Digiday, who later described the problem 12 months ago being an abnormal environment.

Multiple sources note how investors have gradually grown more conservative within their outlook because the global economic outlook is continuing to grow more austere albeit interest remains in those companies that may demonstrate growth.

Speaking recently with Digiday, Lee Puri co-founder and chief growth officer at MiQ noted increased caution among PE firms during the period of the entire year as his company continues to find this type of backer.

He continued to include that while you will have a restriction of valuations for another 12-to-24 months, those companies that may prove their capability to maintain revenue growth in a challenging economic environment will stay desirable.

Valuation are increasingly being squeezed now, Puri added, were on the precipice of a fairly meaty recession and PE is nervous, but we think that programmaic can do perfectly because the economy potentially constricts our projections are strong.

However, Sovrns Knapp continued to inform Digiday how he could win the confidence of his latest backers by outlining an idea for mergers and acquisitions that deviates from the traditional type of market consolidation.

Rather than fundraising with a view to purchasing out rivals on the sell-side of the ad tech market speculation over potential roll-ups that could consolidate the amount of players in the ad tech market continue steadily to hound the marketplace Knapp presented an alternative solution investment theory.

I believe the region around SSPs and exchanges is pretty consolidated, he said, theyre maybe room to consolidate a bit more but thats not the important section of innovation in ad tech.

Knapp explained his theory that acquiring assets which will enable his clients such as publishers such as for example Vox Media to boost their workflows etc. is currently critically important with regards to providing a distinctive feature.

While such services aren’t as headline-grabbing as (former) rivals banding together consider of the consolidation moves created by sell-side giant Magnite recently alternative moves offer better opportunities to upsell to existing clients.

From our vantage point, the important section of innovation may be the software to optimize workflows and manage reporting, said Knapp, adding that easing the responsibility on ad ops pros offered the prospect of up-sell.

Its mundane stuff to report on all of your ad relationships because its chaos once you think you [publishers] ‘ve got things such as Open Bidding, Prebid and you need to manage different SSPs and exchanges, he added. The common ad operations professional spends three-to-four hours each day just logging directly into these different UIs and attempting to reconcile them.

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