|
Mtech Advisors Provides Corporate Planning
and Mergers & Acquisitions Advisory Services to SME Marketing Technology Businesses |
Marketing Agency EBITDA Multiples & Valuations 2023
SME Marketing agencies and martech firms in general have seen a return to pre-Covid valuation muliples. 2021 and the first half of 2022 produced a pent up flurry of transactions driving market multiples to new heights, the result of a combination of factors including the post-Covid market thaw and cheap money. According to Evan Bailyn writing in Business, the number of deals "declined almost 50% for marketing agencies when comparing Q1 2022 to Q1 2023. There are fewer prospective buyers bidding on any given company, which also affects valuation". However, Bailyn notes that the deals currently taking place are not seeing lower valuations involving agencies that have exhibited resilience in the face of these challenging market conditions. Furthermore, strategic acquirers and PE firms are not backing out of deals as doing so "more than one or two deals in a decade has a significant impact on their perception in the market".
Bailyn's article and table of agancy valuations can be accessed in the link below. The table is based solely on the amount of EBITDA multiples from from $1 million to $10 million +. We believe this is somewhat incomplete in that it does not take into account Revenue Growth and EBITDA margin, both of which are integral to a buyer's calculation of value. This is Mtech's model and can be accessed as well in the link below. Nonetheless, there is much overlap in the two calcultion methods and overall, should give prospective sellers a good feel for current valuation mulitples. Keep in mind any multiples will be affecxted and adjusted by factors, including company size, customer concentration, proprietary technology (or technology IQ), customer churn, length of contracts, and more.
SME Marketing agencies and martech firms in general have seen a return to pre-Covid valuation muliples. 2021 and the first half of 2022 produced a pent up flurry of transactions driving market multiples to new heights, the result of a combination of factors including the post-Covid market thaw and cheap money. According to Evan Bailyn writing in Business, the number of deals "declined almost 50% for marketing agencies when comparing Q1 2022 to Q1 2023. There are fewer prospective buyers bidding on any given company, which also affects valuation". However, Bailyn notes that the deals currently taking place are not seeing lower valuations involving agencies that have exhibited resilience in the face of these challenging market conditions. Furthermore, strategic acquirers and PE firms are not backing out of deals as doing so "more than one or two deals in a decade has a significant impact on their perception in the market".
Bailyn's article and table of agancy valuations can be accessed in the link below. The table is based solely on the amount of EBITDA multiples from from $1 million to $10 million +. We believe this is somewhat incomplete in that it does not take into account Revenue Growth and EBITDA margin, both of which are integral to a buyer's calculation of value. This is Mtech's model and can be accessed as well in the link below. Nonetheless, there is much overlap in the two calcultion methods and overall, should give prospective sellers a good feel for current valuation mulitples. Keep in mind any multiples will be affecxted and adjusted by factors, including company size, customer concentration, proprietary technology (or technology IQ), customer churn, length of contracts, and more.
Mtech Advisors 2022 SME Marketing Technology Company Valuation Table
Valuations for privately held marketing technology businesses with revenues between $5-50 million have always been difficult to ascertain primarily because the value of these transactions are either not "material" to most publicly held corporate acquirers, nor required of private equity and venture capital. We have endeavored with our focus solely in the marketing technology space to do a deep dive in researching disclosed transaction announcements, accessing our wide network of martech company owners, knowledgeable industry experts, bankers and sources of industry transaction information to compile the data detailed in our valuation table. See below:
The Art of Selling Your Business
Despite the near freeze in M&A activity in the first six months of 2020, the number of transactions completed on a monthly basis in the last half of 2020 actually outpaced that of any previous year. Leading the way unsurprisingly were verticals least impacted by the Covid-19 restrictions such as technology, healthcare and financial services. Technology alone accounted for 22% of all deals according to Price Waterhouse Coopers. This trend is continuing in 2021. Marketing products and services are white hot as businesses adjust to doing business virtually leveraging AI driven omni-channel technologies. Valuations are now higher than pre-Covid levels, the result of pent-up capital chasing a finite supply of next generation marketing technology solutions. Indeed, both strategic and PE buyers are leveraging these same AI infused data driven solutions to locate and connect with sellers.
In this environment Axial founder & CEO Peter Lehrman had a conversation with John Warrilow, noted author of The Value Builder System, the simple software tool for building the value of a business. The following topics are discussed:
- Gradually reveal business information
- Select the entrepreneur support team
- Choosing the right intermediary
- What is the lead time for developing a relationship with an intermediary
- Know the buyer
- Managing conflict between buyer and seller
- Covid-19 and the decision to sell
The link to the discussion and notes is below. It will be an excellent primer for sellers considering an exit while valuations are high amid remaining uncertainty as to the economy, tax policy, regulations and the like. Don't miss it.
M&A Rebounding to Pre-Covid Levels
We are seeing the rapid return of M&A activity to pre-Covid levels, albeit with variations the result of the virus’ impact on certain sectors of the economy as well as the formation of capital. According to Marco Caggiano, co-head of M&A at J.P. Morgan, deal volume is down year to date approximately 30%, but Q3 is already ahead of Q2. Caggiano was a participant in a webinar co-hosted by the Financial Times and Datasite September 24. Anthony Tutrone, Private Equity head at Neuberger Berman echoed Caggiano in seeing a “big pickup in business” and added that there has been no decrease in valuation in properties that have not been adversely affected by Covid, and especially in healthcare and technology. Tutrone added that it is even more important for PE to acquire assets for portfolio companies even at high valuations; as high or even higher than pre-Covid.
A "Must" Directory for Marketing Services and Technology Providers
Every now and then we recognize a source of indispensable information on the advertising/marketing services competitive landscape. Such a source is Clutch. Click on the button below. Clutch elegantly profiles thousands of private/independent providers of advertising/marketing, web/software development, mobile app development and IT services/solutions providers. Ostensibly positioned as a guide for marketers seeking these services, it is chock full of useful information for CEOs seeking competitive information or strategic partners that will enhance and round out service offerings.
The information includes services provided by percentage for each provider, hourly billing rates, number of employees, web site link, leaders matrices, reviews and much more. Clicking on either Leaders Matrices or Reviews will give you a breakdown of provider category as well as the ability to select by state. Most importantly, if you are not included you have the ability to sign up and be listed. The site is very elegant and a terrific research tool. Do not miss out on this.
Every now and then we recognize a source of indispensable information on the advertising/marketing services competitive landscape. Such a source is Clutch. Click on the button below. Clutch elegantly profiles thousands of private/independent providers of advertising/marketing, web/software development, mobile app development and IT services/solutions providers. Ostensibly positioned as a guide for marketers seeking these services, it is chock full of useful information for CEOs seeking competitive information or strategic partners that will enhance and round out service offerings.
The information includes services provided by percentage for each provider, hourly billing rates, number of employees, web site link, leaders matrices, reviews and much more. Clicking on either Leaders Matrices or Reviews will give you a breakdown of provider category as well as the ability to select by state. Most importantly, if you are not included you have the ability to sign up and be listed. The site is very elegant and a terrific research tool. Do not miss out on this.
Must do Algorithm to Score the Value and "Sellability" of your Business
By: Christian H. Gomez
Do not miss out on this. We were actually working on developing a similar Mtech solution when Kenyon Blunt, a friend and former CEO of a highly successful direct marketing agency, came to me with this revolutionary business assessment software developed by John Warrillow, the renowned author of Built to Sell, one of the best regarded business books written in the last 10 years.
The Value Builder System™ is a statistically proven methodology designed to improve the value of a privately held business. At the core of the system is The Value Builder Score™, an evaluation system driven by an algorithm that evaluates a business on the eight core value drivers acquirers take into consideration when buying companies. The Value Builder Score™ gives a comprehensive assessment of the "Sellability" of a business. The assessment takes about 15 minutes. The deliverable is a FREE 28-page report to the business owner on the value of their business now and the possible future value if the eight value drivers are successful addressed. In my opinion, this report is a must not only for owners considering a sale in the near term, but optimal for those with a 2-3 year time horizon.
I did the assessment myself and you will find the report extremely enlightening and useful. Kenyon will deliver it to you shortly after you do the assessment and walk you through the findings. If you so choose, Kenyon is uniquely qualified to consult you in achieving the necessary improvements that will maximize and position your business for a successful exit. Needless to say, all is confidential.
Here’s the link: http://kenyonblunt.com/value-builder. It would be most helpful to me if you could take the assessment and tell me what you think when you receive the report. I can’t think of a better service and benefit I can provide to you prior to commencing a transaction process. In the meantime, scroll down to 5 Seller Tips previously published in Chief marketer. We trust your year is shaping up to meet or exceed your forecast.
By: Christian H. Gomez
Do not miss out on this. We were actually working on developing a similar Mtech solution when Kenyon Blunt, a friend and former CEO of a highly successful direct marketing agency, came to me with this revolutionary business assessment software developed by John Warrillow, the renowned author of Built to Sell, one of the best regarded business books written in the last 10 years.
The Value Builder System™ is a statistically proven methodology designed to improve the value of a privately held business. At the core of the system is The Value Builder Score™, an evaluation system driven by an algorithm that evaluates a business on the eight core value drivers acquirers take into consideration when buying companies. The Value Builder Score™ gives a comprehensive assessment of the "Sellability" of a business. The assessment takes about 15 minutes. The deliverable is a FREE 28-page report to the business owner on the value of their business now and the possible future value if the eight value drivers are successful addressed. In my opinion, this report is a must not only for owners considering a sale in the near term, but optimal for those with a 2-3 year time horizon.
I did the assessment myself and you will find the report extremely enlightening and useful. Kenyon will deliver it to you shortly after you do the assessment and walk you through the findings. If you so choose, Kenyon is uniquely qualified to consult you in achieving the necessary improvements that will maximize and position your business for a successful exit. Needless to say, all is confidential.
Here’s the link: http://kenyonblunt.com/value-builder. It would be most helpful to me if you could take the assessment and tell me what you think when you receive the report. I can’t think of a better service and benefit I can provide to you prior to commencing a transaction process. In the meantime, scroll down to 5 Seller Tips previously published in Chief marketer. We trust your year is shaping up to meet or exceed your forecast.
Transaction Announcement : Dovetail Database Solutions Acquired
Dovetail Database Solutions, a highly specialized marketing database provider, has been acquired by Merit Direct, headquartered in Rye Brook, New York. Mtech Advisors initiated the transaction and provided advice and support to Dovetail Database Solutions based in Littleton, Colorado. Dovetail specializes in integrating customer and prospect data from client touch points, maintaining that data in pristine condition, and making it available via an easy-to-use online application. The Dovetail application (DAPP) is a proprietary application delivered as (SaaS) enabling rapid customization and delivery of highly complex, multichannel data driven marketing programs. See the press release below.
Dovetail Database Solutions, a highly specialized marketing database provider, has been acquired by Merit Direct, headquartered in Rye Brook, New York. Mtech Advisors initiated the transaction and provided advice and support to Dovetail Database Solutions based in Littleton, Colorado. Dovetail specializes in integrating customer and prospect data from client touch points, maintaining that data in pristine condition, and making it available via an easy-to-use online application. The Dovetail application (DAPP) is a proprietary application delivered as (SaaS) enabling rapid customization and delivery of highly complex, multichannel data driven marketing programs. See the press release below.
Transaction Announcement: Avrick Direct Acquired
Avrick Direct, Inc., a direct marketing company specializing in data compilation founded by David Avrick has been acquired by a private investor. Mtech Advisors provided transaction advice and support to Avick Direct.
Almost all of the major marketing data compilers and list resellers license some Avrick data. The Company's weekly new mover file dominates the industry. All of the major credit card issuers have mailed Avrick's monthly new credit card issue file. HomeData was acquired in 2012 and its new homeowner file was added to the Company's portfolio. Avrick has recently launched an online data portal providing local businesses with their most likely new mover and new homeowner prospects.
Avrick currently compiles approximately 10 million names per month and ships over 2.5 billion records annually. David Avrick is an icon in the direct marketing industry and has now launched the next chapter of his 57 year career as a direct marketing consultant. For advice and direction in building direct marketing programs that work, especially those targeting new movers and new homeowners, reach out to David at [email protected].
Avrick Direct, Inc., a direct marketing company specializing in data compilation founded by David Avrick has been acquired by a private investor. Mtech Advisors provided transaction advice and support to Avick Direct.
Almost all of the major marketing data compilers and list resellers license some Avrick data. The Company's weekly new mover file dominates the industry. All of the major credit card issuers have mailed Avrick's monthly new credit card issue file. HomeData was acquired in 2012 and its new homeowner file was added to the Company's portfolio. Avrick has recently launched an online data portal providing local businesses with their most likely new mover and new homeowner prospects.
Avrick currently compiles approximately 10 million names per month and ships over 2.5 billion records annually. David Avrick is an icon in the direct marketing industry and has now launched the next chapter of his 57 year career as a direct marketing consultant. For advice and direction in building direct marketing programs that work, especially those targeting new movers and new homeowners, reach out to David at [email protected].
5 Seller Tips from a Recently Completed Marketing Transaction
By: Christian H. Gomez - as published in Chief Marketer
We recently completed the sale of a leading provider of“source” marketing data to virtually all of the leading data houses, list resellers and large agencies. After closing I jotted down what I believe will be 5 valuable tips for those of you considering the sale of your smaller, independent marketing services businesses.
Tip 1 - Sell on an uptick so you can sell the future. Although seemingly counter to your business instincts, selling when business is good will enable you to reach for maximum value. Reasonable, projected performance will be much more believable and defensible than if coming off a flat or down year. No matter the rationale for hiccups, even if absolutely plausible, realizing the value of projected performance at closing is much more difficult than if projections are supported by current trends. Read more...
Overcome a Typical Agency Balance Sheet: Get a High EBITDAx for Your Business
The first question I am inevitably asked by any marketing agency owner when discussing valuations of recent transactions is
“What is my company worth”? As Leo Burnett was reputed to have said when commenting on the value of his agency, “The assets of this agency go down the elevator every night.” Indeed, if one looks at the balance sheet of the typical marketing/advertising agency, there is very little there in the way of hard assets, and intellectual property has always been notoriously difficult to value on the balance sheet.
For years the “Rule of 30” has been the benchmark of a well-run agency and a starting point for determining the value of the
business..... Enter the Inc. 5000 where over 10% of the companies on the list (click on the Resources Tab on the tool bar above to view the list) are marketing and advertising agencies with the vast majority boasting revenue growth rates well
over 20% and a ratio of staff to revenue that would indicate high profitability. What gives here? Are the agencies fibbing in reporting their financial results or have these businesses found a solution to consistently exceeding the Rule of 30? Read more...
The first question I am inevitably asked by any marketing agency owner when discussing valuations of recent transactions is
“What is my company worth”? As Leo Burnett was reputed to have said when commenting on the value of his agency, “The assets of this agency go down the elevator every night.” Indeed, if one looks at the balance sheet of the typical marketing/advertising agency, there is very little there in the way of hard assets, and intellectual property has always been notoriously difficult to value on the balance sheet.
For years the “Rule of 30” has been the benchmark of a well-run agency and a starting point for determining the value of the
business..... Enter the Inc. 5000 where over 10% of the companies on the list (click on the Resources Tab on the tool bar above to view the list) are marketing and advertising agencies with the vast majority boasting revenue growth rates well
over 20% and a ratio of staff to revenue that would indicate high profitability. What gives here? Are the agencies fibbing in reporting their financial results or have these businesses found a solution to consistently exceeding the Rule of 30? Read more...
Structuring Earn-outs: 7 Rules to Avoid Fear and Loathing and Asuure Payment
A range of value has been agreed and then, boom, the term sheet arrives and 50% or more of the value is to be paid in the form of an earn-out. The inspiration for this article came from a recently completed project providing financial forensic support for a former client who sold his business with a significant earn-out component. Subsequent to the successful settlement of a final payment amount in dispute, literally “on the courthouse steps” (just prior to an arbitration hearing), it became apparent to me that while there is much information on structuring earn-outs from a tax and accounting perspective, a real-world, business person’s analysis would be useful for small business entrepreneurs contemplating a sale. Learn more...
A range of value has been agreed and then, boom, the term sheet arrives and 50% or more of the value is to be paid in the form of an earn-out. The inspiration for this article came from a recently completed project providing financial forensic support for a former client who sold his business with a significant earn-out component. Subsequent to the successful settlement of a final payment amount in dispute, literally “on the courthouse steps” (just prior to an arbitration hearing), it became apparent to me that while there is much information on structuring earn-outs from a tax and accounting perspective, a real-world, business person’s analysis would be useful for small business entrepreneurs contemplating a sale. Learn more...
Build Your Company to Sell (Even if You Don't Want to)
With few exceptions the chief asset of any successful technology enabled marketing solutions provider is not the technology, its clients, nor its sales and distribution. It's the personnel. It's people that listen to client/prospect needs, build and/or integrate technologies into solutions that they develop and deploy, all the while instructing and assisting less knowledgeable users in how to maximize the utility of the product or service.
We asked Kenyon Blunt, a former CEO of several very successful database marketing businesses about his experience with prospective acquirers. "Here’s what a prospective acquirer looks for in a target company; revenue growth potential, risk of loss of key team members (including the founder) and competitive superiority. Let’s take the talent issues first. Acquirers want to know the business can survive without the founder. He or she may agree to stay on for a period of time but it’s usually in a transitory role and not something to bank on for future results. In many smaller firms that I’ve been associated with, the founder is instrumental in generating new business. This can be a big problem if he or she wants to exit. One of the first priorities must be to develop a new business engine that is independent from the owner....
With few exceptions the chief asset of any successful technology enabled marketing solutions provider is not the technology, its clients, nor its sales and distribution. It's the personnel. It's people that listen to client/prospect needs, build and/or integrate technologies into solutions that they develop and deploy, all the while instructing and assisting less knowledgeable users in how to maximize the utility of the product or service.
We asked Kenyon Blunt, a former CEO of several very successful database marketing businesses about his experience with prospective acquirers. "Here’s what a prospective acquirer looks for in a target company; revenue growth potential, risk of loss of key team members (including the founder) and competitive superiority. Let’s take the talent issues first. Acquirers want to know the business can survive without the founder. He or she may agree to stay on for a period of time but it’s usually in a transitory role and not something to bank on for future results. In many smaller firms that I’ve been associated with, the founder is instrumental in generating new business. This can be a big problem if he or she wants to exit. One of the first priorities must be to develop a new business engine that is independent from the owner....
Introducing our Mtech Advisors Roundtable
A key reason marketing leaders attend industry conferences is to interact with their counterparts to network, learn and partner. We have had the distinct privilege over the years to get to know many of our most accomplished CEOs and business owners. Meet our Mtech Advisors Roundtable, many of whom lead many of the most credentialed marketing technology and services businesses. Our Advisors have graciously agreed to provide their contact information to counsel and share with you. Click the button below to learn more about them and who knows, you may just recognize a friend and colleague you've been meaning to reach out to!
A key reason marketing leaders attend industry conferences is to interact with their counterparts to network, learn and partner. We have had the distinct privilege over the years to get to know many of our most accomplished CEOs and business owners. Meet our Mtech Advisors Roundtable, many of whom lead many of the most credentialed marketing technology and services businesses. Our Advisors have graciously agreed to provide their contact information to counsel and share with you. Click the button below to learn more about them and who knows, you may just recognize a friend and colleague you've been meaning to reach out to!
Who We Are
Founded by Christian Gomez in 1998, Mtech Advisors is the corporate planning business of The Arm Group, Inc. Focused on smaller technology enabled marketing services firms, Mtech Advisors assists its clients in company assessment and positioning, business planning, marketing, and developing and executing M&A transaction strategies consistently exceeding valuation objectives. Mtech provides complete value-added transaction services to both buyers and sellers including pre-transaction review and advice, searches, valuations and negotiation assistance.
Working with agencies, consumer and B2B data, data processing, analytics, direct marketing, SEO, web development and social media businesses across the marketing services spectrum, MTA principals have advised on key transactions involving the acquisitions of small businesses that played key roles in the strategic objectives of firms such as DoubleClick, Harte-Hanks, First Data, MDC Partners, Axciom, HNC Software (now part of FICO), Sourcelink, HarlandClarke, Merit Direct and many others.
Founded by Christian Gomez in 1998, Mtech Advisors is the corporate planning business of The Arm Group, Inc. Focused on smaller technology enabled marketing services firms, Mtech Advisors assists its clients in company assessment and positioning, business planning, marketing, and developing and executing M&A transaction strategies consistently exceeding valuation objectives. Mtech provides complete value-added transaction services to both buyers and sellers including pre-transaction review and advice, searches, valuations and negotiation assistance.
Working with agencies, consumer and B2B data, data processing, analytics, direct marketing, SEO, web development and social media businesses across the marketing services spectrum, MTA principals have advised on key transactions involving the acquisitions of small businesses that played key roles in the strategic objectives of firms such as DoubleClick, Harte-Hanks, First Data, MDC Partners, Axciom, HNC Software (now part of FICO), Sourcelink, HarlandClarke, Merit Direct and many others.
