Virtus Advisory Commentary on AcquisitionLast Thursday, AcuityAds (TSXV:AT) announced that they intend to acquire a Boston-based company, Visible Measures, a programmatic advertising platforms that provides video advertising solutions and analytics. Visible Measures has its own proprietary technology that further expands Acuity’s reach into the emerging programmatic video market, as well as a solution that can be plugged into the company’s self-serve platform, which is the most scalable part of Acuity’s business. We will cover this in more detail shortly, but first the acquisition details:
- Combined TTM revenue (pro forma) for AcuityAds as of December 31, 2016 including an additional 8-months of revenue from 140 Proof, is $75m CAD. A TTM revenue base of Acuity as one entity in 2016 and Visible measures accounts to $70m in revenue.
- Visible Measures has been acquired for $10m USD in an all-cash transaction for 100% of the existing shares.
- The deal has been financed through a Bought Deal for $10.2m at $3.40 per share offering by a syndicate co-lead by Haywood Securities and Paradigm Capital. An over-allotment option exists for an additional $1.5 million dollars.
As with the acquisition of 140 Proof in summer 2016, this deal is both accretive to shareholders and provides a significant revenue boost. We point out that to minimize shareholder dilution further, three of the four founders of the company have elected to sell a total of 1 million of their own shares as part of this bought-deal.
As well, we will point out a little academic corporate finance theory regarding mergers and acquisitions:
More often than not, firms that are bullish on an acquisition want to proceed with an all-cash payment to mitigate any shareholder dilution and recognize the synergies in full for their existing shareholders. When management believes their own stock is overvalued, they prefer to make payment in shares as this technically reduces the price they pay for the stock
Thus, this transaction should be very indicative of the fact Acuity’s management is
incredibly bullish on the stock price.
With all that out of the way, let’s take a look at what Acuity paid to purchase visible measures and how it stands up to other acquisitions in the ad-tech space. Again, we ask readers to keep in mind that Visible Measures
has its own proprietary technology. | Acquirer | Target | Multiple | Note | Acquisition Price* |
| AcuityAds | Visible Measures | 0.5x revenue | Proprietary video-ad DSP and analytics tool | $10m |
| Yellow Pages | Juice Mobile | 1.4x revenue | Proprietary mobile RTB/DSP platform | $35m |
| The Rubicon Project | Chango | 2.84x Revenue | Search retargeting platform | $122m |
| Centro | SiteScout | 2x Revenue | Proprietary DSP | $40m |
| Matomy Media Group | Optimatic | 15.6x EBIT | Programmatic monetization platforms for video advertisers | $25m+ earn-outs |
*All prices in USD except Juice Mobile An all-cash deal allows for a cheaper multiple as the target management faces more certainty. However, any way you slice it this deal is a steal for Acuity. The multiples above speak for themselves when it comes to acquisition prices in the ad-tech space. We believe with Acuity’s world-class management and evidently strong sales approach, the company will be able to take the Visible Measures data analytics tool into the hands of advertisers in North America and Europe. The synergies between the two companies are obvious, and we expect that AcuityAds will face very little increase in operational expenses relative to the tremendous revenue boost it receives even without taking into consideration the upselling opportunities.
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