Globo and Eletromidia: just the tip of an iceberg

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Consolidations will be the inevitable path for the development of this industry and countless others. Always having technology as a driver.

Text by Pyr Marcondes, Senior Partner at Pipeline Capital

And look, we’re talking about a sizable iceberg. Unlike the real ones, which bitterly for us are dissolving, this one will only get bigger and bigger and bigger.

We are talking about the scenario of recurrent consolidations, which somehow has been happening in the communication and marketing industry in Brazil for some time, but which will certainly continue to grow and the agglutinations will be so frequent, as in a way “surprising” for everyone.

Few (except those directly involved in the negotiations between the two companies) could imagine a movement like that of Globo and Eletromidia, not even at a bar table. And if you had already thought about the hypothesis, congratulations. But it is, in any case, a non-trivial business.

In the editorial coverage of the business media, we follow analyzes realizing that Globo is now looking at the DOOH market, because it is growing. Hence the purchase of part of the largest company in the sector in the country. It’s true, but it’s only part of the truth.

Consolidations will be the inevitable path for the development of this industry and countless others. Always having technology as a driver. And beyond that, we will see more frequent cross movements, like that of Globo, leaving its traditional sector to seek expansion and growth in a different, but related sector. It is this vein of intermarket business, in search of the creation of platform companies, more oriented to the omni, that we will continue to follow in the media.

This is because the traditional perimeter of origin for many companies has started to become too small for their advancement and the growth of their businesses. It is also because connections that were not so possibly clear before are now becoming more and more obvious. All because of the digital transformation and its consequences.

There is a considerable number of possibilities for Globo and Eletromidia to draw common paths. From the obvious retro and mutual commercial leverage in common businesses to the most complex technological integration of TV, streaming, DOOH, geolocation and programmatic platforms, via IPs and 5G.

From an investment perspective, many assets today are relatively “cheap” in relation to what they could be
in other times, due to numerous macroeconomic and sectoral reasons (as is the case of martechs and adtechs, which are experiencing a present ebb of investments in their businesses). As a result, we are witnessing a consequent drop in the average value of company valuations. Those who can and have cash will buy. The sales targets will be companies with value, with a future, with potential, but which, for some financial (and marketing) reason, understand that this could indeed be a good moment to do M&A. Even on the low. In a macroeconomic and financial white paper that the Pipeline Capital Tech Group developed, called O Futuro dos Investimentos, there is an overview of the macroeconomic scenario and the probabilities of financial market behavior in 2023. Briefly, we reflect on these consolidation movements and the role of various players in this chain. One of the first points to highlight is that the marketing and communication industry, with its variants of martech and adtech, is always, depending on the source of analysis, among the three or five most promising sectors for consolidations and M&A growth.

Another is what the financial market calls dry powder. That is, financial resources dammed up and stored in the vaults of large investors, and which very soon, as soon as the macroeconomic signs become a little clearer (and safer), will be replaced on the market and with great speed. It will impact all industries, including this one. Another is the sector’s global holdings, increasingly diversified and looking for assets to be purchased in areas previously far from conventional such as AI, commerce, data intelligence, among others. More investments crossing previously unexplored borders.

Let’s also include Corporate Venture Capital (CVC) funds here. CVCs are the mechanisms par excellence for companies in general (in the case of the communication and marketing industry, let’s call them advertisers) in search of innovation and differentiation. Once again, companies pecking outside the yard.

Last but not least, at the bottom of the pyramid, startups, the future of it all. They will also continue to be the target of subsequent mergers and acquisitions in the coming years.

As I said, it is a huge iceberg growing and solidifying. This one, if you are reading me, is not going to dissolve. On the contrary. Soon, we will all be dwelling on it.

Text originally published by Meio&Mensagem

Text by Pyr Marcondes, Senior Partner at Pipeline Capital

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