Last year, Digiday reported that TRUSTX — a nonprofit ad exchange promising advertisers transparent inventory from DCN publishers such as News Corp, Hearst, and The Washington Post — and Akamai were collaborating on a privacy-enhancing technology.

Digiday was unable to establish how mature such plans are but sources claimed that parties involved were in the process of funding it further via third parties. If successful, the pair could seek to make their privacy-enhancing technology available outside of the DCN-owned marketplace.

“We’re always looking for ways to speed up innovation in fulfilling our mission for publishers, advertisers, and consumers,” said David Kohl, CEO of TRUSTX, in an emailed response to Digiday’s inquiries.

“Acceleration can happen through new technologies, partnerships, and capital but the bar for capital is much, much higher. Companies solving meaningful, systemic challenges across the supply chain — with truly innovative approaches — are the ones getting investor attention,” Kohl added.

Akamai, a multibillion-dollar, Nasdaq-listed company with a lineage in enterprise services such as providing content delivery networks, cybersecurity, and cloud computing did not immediately return Digiday’s request for comment.

‘Strange market environment’

These developments come amid a “strange market environment” with LUMA Partners’ Q2 market report indicating that the period was “one of the slowest M&A markets in a decade” albeit there are indicators of a pending change.

For example, the investment bank itself advised on DoubleVerify’s $125 million purchase of SciBids, a company that pitches advertisers AI to help reduce wastage on their online media campaigns, in Q3.

Sources hint that LUMA’s upcoming Q3 report, expected in early October, may point to dealmaking activity still being on “the slow side.”

However, a recent trickle of deal activity in the space — such as CTV duo Cadent and VideoAmp respectively selling to private equity firm Novacap and raising $150 million in services G funding from Vista Credit Partners — point to an eventual end of the hiatus in dealmaking.

While contemporary headlines in the mainstream business press may preach “the return of the tech IPO” sources expressed doubt that the halo effect of ARM and Instacart’s (thus far) successful initial public offerings will reach as far as the ad tech sector.

Ciarán O’Kane, a partner at First Party Capital pointed to the recent funding rounds of Anzu — an in-game ads specialist that raised $48 million Series B funding — claiming they are indicative of a cautious market.

“The M&A market is back, but it’s not back-back,” he said, “the deals are kind of conservative … the 605 deal [to sell to fellow CTV measurement company iSpot] sounded kind of like an offload, and that’s indicative of where the market is right now.”

Cross-border traffic

William Ritchie, founder and managing director of U.K.-based WY Partners told Digiday that his outfit’s observation of a 36% year-on-year uptick in cross-border dealmaking in the sector over the past 24 months prompted him to form a transatlantic partnership with fellow M&A advisors Continuum.

He noted that U.S.-based PE firm Falfurrias Capital Partners’ September 2023 investment in U.K.-headquartered Brainlabs, a deal that values the latter at $320 million, was indicative of a trend he expects to see much more of in 2024.

Ritchie also told Digiday to expect yet more interest from PE outfits in the wider digital media landscape, especially when it comes to mid-size outfits seeking to disrupt incumbents in their sector — think of how Brainlabs competes with the industry holding companies, or CTV-measurement outfits challenge Nielsen.

“If the [sale] process, is run in the right way, then you’ll find an investor that will not only pay a good price but also be aligned with the management team going in,” he added. “We always say to clients that you really should be in a situation where you’re working hand-in-hand with your private equity investor.”

Elsewhere, Ritchie pointed to MiQ’s subsequent acquisition trail after its 2022 takeover by PE firm Bridgepoint, as indicative of the deal flow he expects in 2024.

“It’s a way for U.K. businesses to get a foothold in a much bigger media market,” he said, adding that while there may be some interest from U.S. businesses to acquire a European “beachhead,” differing interpretations as to what constitutes a scaled business may cap such potential deal-flow.

PE needs a PR makeover?

The negative connotations of PE takeovers are wide-held, with the formula of takeover, restructure, asset-strip then flip, understood among many.

However, Daniel Gilbert, CEO of Brainlabs, claimed the decision to opt for a PE partnership, as opposed to a potential sale to an established industry player, was a conscious one.

“When we were running our process, we never went to one of the industry hold-cos or any other strategic buyer,” he told Digiday, adding that Brainlabs had upwards of a dozen investment offers over the period.

Gilbert further explained his theory that Brainlabs’ clients appointed them because of their point-of-differentiation, and this would be difficult to maintain after any potential sale to one of the industry’s holding companies.

He further articulated his opinion that more entrepreneurs in the digital media landscape increasingly have PE investment on offer as the sector matures and that this is “increasingly more attractive than public listings.”

“PE looks for good business practice, solid financials, corporate management, and low client-concentration and technology, investment,” added Gilbert, stressing how this is the right option given Brainlabs’ current trajectory.

“I think PE does a terrible job of its own PR, either that or they don’t care … there are different flavors of private equity,” he further told Digiday. “The type of private equity partner that we’ve got on this side of the market is growth-private equity, and they are incentivized and interested only in the growth of the company.”

Don’t expect any ad tech IPOs any time soon

Speaking separately with Digiday, Alex Wellins, cofounder and managing partner of investor relations and IPO-advisory firm The Blueshirt Group said the excitement kicked off by the public listings of ARM and Instacart is unlikely to have a ripple effect that will be felt by ad tech companies any time soon.

Concern over levels of consumer spending, ergo marketing spend, in Q4 — when ad tech companies can earn as much as 30-50% of annual revenue — means the industry hiatus for public listings is likely to continue for a while longer, according to most sources consulted by Digiday.

“There’s a number of very high-quality advertising-orientated tech companies that are at scale that could go out,” said Wellins, adding that, for now, it’s a wait-and-see process, for such outfits.

“Companies behind this wave [of Q3 IPOs] will predominantly be software companies that are hopefully going to do well, and that should start to create optionality for more ad tech companies sometime next year, that’s how we see it.”