While the results of both the US presidential and congressional elections are by no means self-evident, recent indicators point to a divided government, with Democrats likely to control the White House and Republicans to hold tight to the Senate.
Despite the uncertainty, tech stocks are rising and big tech players are leading the rally – despite being criticized and scrutinized from all quarters on Capitol Hill – and the few remaining publicly traded ad tech companies basking.
For example, The Trade Desk reported $ 216 million in revenue for the third quarter, with the market capitalization of the demand-side platform around $ 30 billion – a valuation three times that of most agency holding groups in the advertising industry .
Even with the prospect of a potentially interventionist presidency in Biden and the emerging Justice Department case against Google, sources believe that a balanced Senate could be a prognosis for smooth sailing for tech companies and pave the way for necessary market consolidation.
Marc Suidan of PwC, an expert on mergers and acquisitions in technology, media and telecommunications, told Adweek that the surge in stock prices in recent days suggests a “super positive” outlook for the market for years to come with earlier speculation about large corporate tax hikes now less likely.
“If the White House and Senate were under one party, they would definitely be scrutinized and almost anything would happen,” he said. “The fact that it’s divided drives the market to be positive when they are [Big Tech and potential M&A deals] are checked, both parties would have to agree, which is not easy. ”
Suidan went on to describe how M&A deals in the telecommunications, media and technology sectors were only briefly interrupted as economies around the world tried to adapt to the Covid-19 pandemic, noting that gambling companies in particular were in this Area were active.
Earlier this week, some sources had speculated that the rest of 2020 could see a spate of M&A activity, with participants eager to close deals before (expected) significant increases in capital gains tax and / or possibly tightened regulatory scrutiny .
With the prospect of a Democratically controlled White House and a Republican majority Senate looming, some believe the shoreline is clear for a relatively smooth consolidation of the digital media sector.
“The economy wants a Biden White House and a Republican Senate,” said Terence Kawaja, CEO of investment bank Luma Partners, noting that business continues regardless of the election results. “With a divided government, that means you generally get less government.”
Meanwhile, Kyle Evans, managing director of equity research at financial services firm Stephens Inc., stated that potential M&A deals at the lower end of the digital media sector are likely to benefit from continued government scrutiny of a handful of key players.
“I see very little regulatory risk within Ad-Tech in M&A as they compete in the shadow of the largest companies in the world,” said Evans. “There are more than 20 DSPs and more than 60 SSPs in the market, and a handful of public companies with very strong balance sheets. So the consolidation in open internet ad tech seems like the natural result to us.”
While Kawaja has noted that while the sector can benefit from a light-touch regulatory system at the national level, there is an industry-wide realization that it needs to correct some of the long-established practices that prevail in the digital marketing industry, or else it will be under tight government scrutiny – as evidenced by this week’s vote on Proposition 24 in California.