Magnite’s $1.17bn Acquisition of SpotX

By Britney Cheng, Christina Lee, and Ryan Horlick (University of Michigan), Luca Delpippo, Jinghan Jennifer, Sanjana Ramaswamy, and William Chang (University of St Andrews)

 

Overview of the deal


Acquirer: Magnite

Target: SpotX

Total Transaction Size: $1.17 billion

Closed date: April 30, 2021

Target advisor: Goldman Sachs


Magnite’s (NASDAQ: MGNI) acquisition of SpotX, an advertising platform previously owned by the European entertainment network RTL Group, will create the largest independent CTV and video advertising platform. The combined cash and stock deal is a result of Magnite’s long-term goal to grow within the connected TV space. The pro forma company will allow clients to grow their businesses across various formats, including CTV, video, display, and audio. As a result of this acquisition, two-thirds of the company’s revenue will come from the fastest-growing market segments. The deal has received broad industry support as it will create a comprehensive advertising product portfolio for both programmers and publishers alike. This acquisition highlights the industry trend as television advertising revenue is shifting from traditional TV into streaming services. The combined capabilities of Magnite and SpotX will allow for a better solution to meet clients’ programming advertising goals.


“Sellers have been calling for a scaled independent alternative to the giant companies that dominate the CTV marketplace, Magnite wants to be that alternative” - Michael Barrett, CEO (Magnite)

Company Details: (Acquirer - Magnite)


Magnite (NASDAQ: MGNI) is a sell-side advertising platform that provides technology for publishers to monetize their content across various screens and formats. The company operates both in the United States and internationally. Its advertising platform also allows agencies and brands to access brand-safe ad inventory and execute advertising transactions.


Founded in 2007, headquartered in Los Angeles, California (USA)

CEO: Michael G. Barrett

Number of employees: 569

Market Cap: $3.161 billion (as of 13/05/2021)

EV: $3.29 billion

LTM Revenue: $246.05 million

LTM EBITDA: $6.97 million

LTM EV/Revenue: 13.39x

LTM EV/EBITDA: 215.72x


Company Details: (Target - SpotX)


SpotX provides software to digital media owners that enables them to monetise their content with video advertising.


Founded in 2007, headquartered in Denver, Colorado (USA)

CEO: Michael Shehan

Number of employees: 400+

Market Cap: N/A (privately held company)

LTM Revenue: $164million


Projections and Assumptions

Short-term consequences


Overall, the short term consequences of the deal seem to be generally positive across industry leaders. The pro forma company’s new position as the leading independent CTV platform will allow them to better serve their clients in this fastest-growing segment of the market, which company executives expect to take meaningful share from linear TV over the next several years. This acquisition is an important step, especially in Magnite’s industry, due to the importance of scale and reaching the largest possible audience when attempting to attract the demand that CTV and video clients are seeking. Some critics say that Magnite overpaid, citing that the purchase price was four times the amount RTL originally paid to acquire SpotX. However, this price increase can be attributed to the popularity of CTV and the necessity to enter the CTV space to meet clients’ demands. Additionally, Magnite was able to pay this large sum partially because of recent price increases in its stock, allowing the company to have more financial leverage to close deals such as this one. Overall, sellers have been calling for a scaled independent alternative to the large companies that currently dominate the CTV marketplace. This acquisition represents a means for Magnite to become that alternative.


Long-term Upsides


Magnite has announced that following the integration of SpotX into the company, that this will immediately f