By Chris Legg
Chris is a partner and Senior Managing Director at Progress Partners; He lives in Cambridge, MA, and is based in Boston.
December 21, 2018 ? 2018 was a pivotal year in the TMC (Technology-Media-Communications) M&A environment, with a recorded $735 billion in transaction volume, 4,533 deals announced, and most importantly, a plethora of blockbusters with precedent-setting importance. Deals including SAP-Qualtrics, IBM-Red Hat, and AT&T-Time Warner will have lasting implications on tech executives? investment and management decisions. Other high-profile transactions include Comcast-Sky, Nexstar-Tribune Media, and Adobe-Marketo. Relative to the last decade of transactions, 2018 was a high volume and high deal-count year, though suppressed relative to 2017 amid increased market volatility and geopolitical risk. Nevertheless, transaction premiums increased over 2.5 percentage points, representing rising demand and increased conviction in deal synergies.
Against the backdrop of the general M&A market, the TMC market has almost doubled in size since 2008, a trend reflecting macroeconomic conditions, but more importantly the high rate of growth in the technology space. With a number of developing industries such as financial technology (fintech), programmatic advertising, and artificial intelligence, opportunities for consolidation remain attractive. Each sub-sector represents a shift away from hardware driven technologies toward a model leveraging software as a service (SaaS). Furthermore, a push toward increased productivity has driven development in automation, manifested in a number of sectors including artificial intelligence, data analytics, and robotics.
In the advertising technology market, many large media and technology firms aim to bring advertising capabilities in house. Progress Partners recognized these trends in 2018 and capitalized off this opportunity with a number of deals. Select transactions include the sale of Magnetic, a programmatic platform leveraging artificial intelligence and machine learning, to Deloitte Digital, and the sale of Zapp360, a technology company offering proprietary mobile messaging, to a4. Despite heavy M&A activity in the space, the market remains heavily fragmented, presenting continued opportunity for consolidation.
Private equity firms increased their role in M&A transactions in 2018, especially in companies with recurring, subscription based-revenue models to protect against the risk of economic downturn. Analysts predict that this trend will continue into 2019. The view amongst corporate strategists of large technology companies is a rise in deal-count in 2019. Amid this positive view, there are some headwinds, including concerns over market volatility, disparate valuations and interest rate hikes. I expect the 2019 M&A landscape to present a number of opportunities to drive significant evolution and value creation in the TMC space.
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