Recession Fears, Credit Challenges Won’t Impact Online Ad Agency M&A Activity

The threat of an economic downturn, a credit crisis and slowing ad growth have not dampened the heated M&A market for interactive ad agencies, said Anton Levy, managing director of PE firm General Atlantic’s media and consumer practice. In a Q&A with the WSJ, Levy insisted that with ad spending continuing to migrate from traditional media to digital, companies like Google (NSDQ: GOOG), AOL (NYSE: TWX), Yahoo (NSDQ: YHOO) and Microsoft (NSDQ: MSFT) will prove to be fairly immune to “some of the macromarket environment issues like the credit market.” The same applies to the “growth-equity part” of the PE market.

Back in February, General Atlantic took a majority stake in interactive ad shop AKQA. Now, Levy is helping AKQA make some unspecified purchases of its own. Some of the other points Levy touched on in his Q&A included:

Valuations: One thing Levy is less than certain about is if valuations for online ad agencies will continue to rise. Whether or not they do, large ad agencies have a demand to buy the kind of digital ad skills that can’t be quickly developed within their own organization. And because that demand and the potential for growth still exists, PE firms like General Atlantic will also be willing to pay the full price in pursuit of acquisition targets.

Making M&A’s Payoff: The payoff comes from the complementary services a buyout can bring to the overall organization. “We are not looking at roll-ups. We are very focused on how do you leverage a distribution base, how do we leverage a brand, how do we leverage a customer base, and how do we leverage a product portfolio. So when you buy somebody there are true synergies that you can leverage right out of the gate.”