AdExchanger’s podcast last week had an interview with Luma Partners’ founder Terry Kawaja. You probably know a little about him because of his famously crowded Lumascape slide, which features all the old-time ad tech companies that got a piece of the action between advertiser and publisher in the media buying business. You may notice that many of the companies on that slide are gone. And their demise has probably enriched Kawaja,who seems preternaturally able to spot trends. In ad tech he was able to see a wave of consolidation coming in and ride it from the earliest days, as both a supporter of entrepreneurs who loves to advise them and position them for the best outcomes and a strategic advisor to larger companies threatened with disruption. He learned that these transactions work best when they’re a win-win for both sides when he worked on two other industry consolidations, radio and telecom, before going out on his own to found Luma.
Typically, investment bankers work in the background when they buy and sell companies, but Kawaja has not escaped a certain notoriety, because he has advised on the majority of ad tech mergers and acquisitions, as the industry continues to mature and consolidate. Terry personally has advised on the Oracle Moat acquisition, Singtel’s purchase of Turn, Criteo’s acquisition of HookLogic, Adobe’s of Demdex, Neustar’s swooping up Aggregate Knowledge, and Google buying both Admeld and Invite Media. Over half the 44 deals Luma completed were ones in which they asked the buyer what its major strategy was, given the trends in the market, and what capabilities it would need to accomplish that strategy. Then, drawing on expertise developed from talking to all the entrepreneurs in the space, Luma is able to match the startup to the enterprise strategy.
New industries always spawn many startups, most of which don’t make it. Of the ones who do, most are sold to provide an exit for the founders. Here in digital, because there were so many companies formed, Terry knew the inevitable wave of consolidation would be longer. And nobody else really wanted to advise media companies. The combination of massive fragmentation and high growth made most merger advisors run in the opposite direction.
There’s an old adage is that it’s better to be bought than sold, but the clients of Luma Partners are both bought and sold, because Kawaja does something more like strategic matchmaking than simple mergers and acquisitions. He spends a lot of time with the buyers, not just the sellers, to figure out what they want to accomplish. Usually the sellers desire an exit to a stronger partner so they can continue to grow, whereas the buyers are looking to acquire a missing piece of an end-to-end offering. That’s certainly true of Oracle, which made most of its digital media acquisitions like MOAT and BlueKai because it was looking to transition all of its business to the cloud, and its existing database products were all on-premise. To rebuild all their legacy products would have cost Oracle a window of opportunity that it couldn’t afford to miss, so it acquired companies that were already digital.
In 2018, consolidation continues, albeit not as quickly. One reason is that GDPR has created uncertainty, which gives people pause. But another is that the entire media and telco world is awash in deals — about 300 of them. That’s a tectonic plate shift that needs to be resolved before people return to thinking about what capabilities they need from the digital world.
Perhaps ominously, there are also fewer independent companies. But just you wait: the blockchain is coming.