KUHN CAPITAL Tuesday, March 20, 2018
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Every Move You Make


For all the huge valuations put on larger social media sites (Facebook: $60B; LinkedIn: $18.5B), the real M&A action doesn’t feature social media websites per se. Rather, it’s in the undergrowth around them.

Specifically, it’s among the companies that create, target and serve ads to social media users.
The pace of transactions is picking up as these ad facilitators gain scale and get better at their jobs. What’s their job? Mostly it’s figuring out who’s likeliest to buy what and how profitable it is selling to them.

That profit is growing as Big Data gets better at tracking you and discovering patterns that predict a sale. Who knew that your pattern of “Likes” on Facebook is a predictor of your sexual preferences?

In pursuit of this basket of ad technologies, the following acquisitions took place this last quarter:

• PR powerhouse Ketchum bought Capstrat for an undisclosed amount. Capstrat sells marketing and interactive communications services, including Internet strategy, website design, Social Media network development, and advertising content.

• SaaS applications developer Quadrant 4 Systems (sales: $27 million) bought Q4 Mobility. The seller develops mobile apps which include analytics, Social Media, in- app advertising, press and media management, etc.

• Oracle – obviously one of the most active acquirers of Social Media marketing firms -- purchased Eloque for $957 million from a consortium of private equity groups headed by Bessemer Partners. Eloqua’s SaaS applications help clients automate marketing processes and relate them to revenue performance. At the time of acquisition, Eloqua was losing money. Nonetheless, in the only Q1 transaction for which multiples have been published, it sold for 9.7x sales.

• Advertising agency conglomerate WPP bought john st. for an undisclosed amount. john st. sells Social Media services: strategy, community management, content creation, social application design and development, monitoring, and analytics, along with advertising content.

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