Digital investors take time as sterling falls

Following the end of Queen Elizabeth II’s period of mourning, Britain’s new government unveiled a series of policies causing a selloff in British Pounds, aka GBP, leading to historic lows for the currency.

For example, this week the British pound fell to an all-time low against the US dollar, prompting the Bank of England to take rare steps to stabilize the situation in international markets.

The instability is the result of UK government policies unveiled last week, which include tax breaks for the wealthy paid for by public borrowing, and are being dubbed “economic repercussions” by many, with many predicting a difficult road ahead.

Despite the opprobrium, proponents might argue that such market conditions will spur activity for bargain-hungry investors (particularly those laden with the still-mighty U.S. dollar).

In 2022, several UK-based digital media companies received notable investments, including AdLib.io, LoopMe, and MiQ. So, with the likes of British ad-tech hopeful BrainLabs keen to do the same (and likely others yet to be confirmed), some have wondered if this net is about to turn into a flow of foreign investment.

To get an idea of ​​what might be to come, we interviewed industry insiders:

Not enough catalyst

Brian Wieser, global president, business intelligence, GroupM told Digiday that similar fluctuations in the Argentinian and Turkish currencies in recent years should serve as an example of what to expect. “A significant short-term move in a given currency will generally not be enough to catalyze new M&A activity,” he added.

This is great for those who were already looking in the UK

Mark Sainthill, managing partner, M&A at Cactus, told Digiday that the current uncertainty and decline in the value of the UK currency is now an added bonus for acquirers who have already been looking in the region.

“We are in the process of selling a British company and for them [the buyer], that’s great because it’s 20% cheaper than under normal circumstances,” he added. “I haven’t had many US buyers calling and asking if they can buy, but we expect that to happen.”

Mergers and acquisitions are normally 3-6 months late

Kevin Flood, partner at investment fund FirstPartyCapital, said that even if the weakness of the pound and euro against the US dollar continues, it is unlikely to spur immediate action, even if there was a pre-existing interest.

“While there is good value to be had, volatility is going to detract from that somewhat,” he added. “But if the US dollar strengthens, I think it’s inevitable that it will attract investment and M&A in Europe and Britain…if it holds up, you’ll get cash-rich US companies and also private equity acquisition companies, but normally mergers and acquisitions lags the currency three to six months.

Pause, breathe and focus on efficiency

Nandi Gurprasad, start-up advisor and co-founder and CEO of YEARXERO, noted that the pre-existing slowdown in advertising spending is unlikely to trigger a wave of investment in the near term, although some strategic players could potentially see opportunities. inorganic growth. .

“When there’s such uncertainty, mergers and acquisitions slow down because buyers and sellers don’t know which way things are going,” he said. “People I talk to (even those who’ve done quite a bit of acquisitions recently) say we need to take a break, breathe, digest and look at things like operational efficiency.

Never waste a crisis

As with every crisis, there are opportunities. All sources noted how those outfits that are likely to attract investment – ​​once volatility concerns abated – are those that promise efficiency gains, while addressing pre-existing concerns.

If continued volatility further strengthens the US dollar, investors may look to the European continent (including the UK) for potential opportunities. Fabien Magalon, co-founder and CEO of Xpln.ai, a France-based company that aims to help advertisers optimize and measure the results of their advertising campaigns after the end of the third-party cookie, explained how his company was able to recently raised $2 million, even with continued uncertainty.

“We raised our money mostly from angels,” he said, adding that early-career angel investors were likely reassured by his co-founders, who include those who had previously sold their businesses to Comcast and occupied senior engineering positions at Google. “The problem we are solving is well known, and a great opportunity,” Magalon added, “that, our track record and combination of experience was enough for investors to see us as less risky.”

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