Waiting In The Ad Tech Exit Lounge
Hello, ad tech readers. Welcome back to another edition of the FPC newsletter. We took a little time off - mostly because of industry events (Cannes et al), a slow news cycle and non-industry-related stuff. It’s good to be back.
The Return Of Ad Tech M&A
You might have read about the return of ad tech M&A in several trade publications, a thawing of a thoroughly frozen market.
To an extent, it’s sort of true. There have been some deals, but nothing blockbuster.
It’s probably best to characterise it as a prelude to something much bigger. People are itching to make deals, but most will hold off until after the US election or wait until the Fed starts cutting rates.
The latter will make debt cheaper for those bigger-ticket items.
Either way, we are on the cusp of a big M&A cycle. Propelling this is a bigger cohort of buyers. From the FPC perspective, we have identified key buyers in the following groups:
Public companies looking to grow.
PE hunting for profit.
Private companies looking to beef up capabilities and profit before a liquidity event.
There are many ad tech vendors aggressively shopping themselves right now - especially at the top end of the market ($250 million and above).
Tom Tiscari profiled one of those, Teads, in a recent post. In it, Tom breaks down Teads's real value, estimating it at $2.2 billion. It’s a great breakdown and worth reading.
As he points out, the market is woefully undervaluing Teads:
Result: $2.2 billion equity value on $156 million in estimated FY23 EBITDA translates to a pricing multiple of 14.7x. Our AdTech Core10 is trading at 41x EBITDA ex-TradeDesk. TTD is trading insanely high at 151x EBITDA.
It’s insane how ad tech companies get valued. If Wall Street, bankers and the ad tech SaaS-hole mafia dug deep enough, they would realise that all media spend is equal. It just gets nuanced from an accounting perspective, depending on the market narrative you are spinning.
FPC Portfolio Companies In The M&A Exit Lounge
We have 3 or 4 companies engaged in a sale process right now, and one or two transactions will likely happen by the end of the year.
What to note about our deals:
It's a decent start, but the bigger deals will come in the next 12-24 months.
They prove out the FPC model, investing for value rather than the usual VC memes and themes.
FPC can create value for LPs.
And finally, you should invest (or invest more) in FPC fund 1.
Now is the time to strike. Read on.
Threshold For FPC Fund 1 Goes Up To $100K From September 1
Given the imminent liquidity events and the fund's general paper value increase, we are raising the minimum investment threshold to $100K.
We are giving industry insiders and newsletter readers this last opportunity to invest at the $50k level before the deadline. Anyone who has invested before can also top up on their previous amount.
Things to remind you of once again about FPC Fund 1:
We have the best portfolio of companies in ad tech.
We have exits coming.
The portfolio is currently up 30% on paper value. A bunch of mark-ups and several exits in the next six months should push that to 2x TVPI by the end of the year.
We know the buyers of our portfolio companies.
We have the industry's most extensive network of LPs, who bring us the best deal flow and help scale companies daily.
We have global coverage.
What more can be said about all of this? Rien, as an ad tech French person would say.
Please email us at INFO[AT]FIRSTPARTYCAPITAL.COM or fill in the form below.
We will leave it there, avid readers. But before you go, ponder this over the weekend: advertising is a trillion-dollar industry; ad tech powers advertising; and FPC is the only fund outside the US investing in early-stage foundational ad tech. Until next time.