Mergers & Acquisitions Finance Strategies for Ad-Tech & Media
To the delight of Marvel fans around the world, Disney’s potential acquisition of 20th Century Fox for $52 billion may come later this year. The merger and acquisition activity in media and ad-tech during 2018 will likely continue as larger entities expand their audience footprint. But you don’t have to be involved in a multi-billion-dollar acquisition to be complex. Smaller M&A activities face operational challenges, particularly to the finance arm of the organization.
Here are four considerations for ad-tech and media companies to employ as they spin-off business units, acquire new subsidiaries, or operate incorporated entities in different countries.
1. Cutting OpEx by working outside-in
Reducing cost is the first inclination for finance during mergers and acquisitions, particularly to improve the profitability for each ad-tech or media network. That said, cutting costs to save in the short term can be risky. Instead, focus on how to strategically save by working on the outer rims of finance and moving in. For example, starting with payments, expenses, publisher/creator management, and bank engagements first involves much less operational upheaval than a complete back-office overhaul.
Take the best tools and approaches from each organization and optimize these external processes. Bring in automation technologies to increase in their value across multiple entities. Automation is best utilized to maximize economies of scale. The broader the adoption of automation technologies, the more savings you can expect, as well as improved productivity and efficiency across each business unit.
2. Leverage multi-entity financial technologies to consolidate data
Disparate data is the enemy of quality bookkeeping. Regardless of how big the media empire is, merger or acquisition activity involves a joining of books at some level. As a controller or CFO, you need to identify the best way to centrally manage financial data across multiple subsidiaries. A consolidation effort includes:
- Achieving visibility into expenses, payouts, and settlements entities are making
- Streamline the effort it takes to roll up data from various entities
- Establish the ability to drill down to each subsidiary from a central point
- Define and monitor processes across subsidiaries so they can are easily audited
Financial technologies such as publisher and creator payables and performance tracking systems are often localized to specific entities. That can actually be problematic. Dissimilar systems can make control and standardization harder. Standardizing each subsidiary or entity on systems, unless these systems tied to a specific business model, should be a clear goal, even at a global level.
3. Segment across subsidiaries and individuals’ roles
Establishing access rights to information is one of the most critical elements of a multi-entity approach. If maintaining confidentiality across subsidiaries is a requirement, each system must support data separation, while still allowing headquarters to roll up data. Ad and affiliate networks have already expanded into global publisher relationships. As media companies likewise become more global in scope, the need for individual autonomy with standardization will become necessary. This can include:
- Deciding the best method for separating funds for payment
- Meeting unique tax compliance controls for international entities
- Meeting regulatory compliance controls for international entities
Systems designed to centrally manage but still segment these across the wider organization are the most desirable.
4. Maintain brand identity and localization for each subsidiary
While Disney may be a recognizable brand, the company still maintains various sub-brands and companies for specific audiences and purposes. Any outward-facing technologies, such as portals and communications that involve publishers and creators should individually be branded to support each subsidiary. One situation is if a network is located in another country, their branded communication points will also require engagement in different languages, currencies, taxation, local approval personnel, and governance requirements. Or if the larger media company maintains brands in various sectors, contribution partners to each brand will likely have a unique association with that brand (e.g. baby products vs. kid products vs. adolescent products).