Adnimation in talks for a buy; could revisit exit plans after dropping 2021 public debut, cofounder says

Interview 28 December

Adnimation in talks for a buy; could revisit exit plans after dropping 2021 public debut, cofounder says

Adnimation, a digital advertising technology provider, is involved in active conversations with one potential target and could look to acquire a video technology company or something in the connected TV (CTV) world, said CBO and cofounder Tomer Treves.

The CBO said he wouldn’t be surprised if it engaged in M&A in the next two years. He said if it acquired, it would likely be in 2023.

The executive said the Lod, Israel-headquartered company, founded in 2013, has looked at a few early-stage companies with little revenue that have developed something good but lack the ability to reach the market.

CTV, which refers to televisions connected to the Internet, is the most interesting thing happening in the sector, he said. Younger generations are not watching traditional linear TV channels but rather “everything that is on demand,” Treves said, adding that this was especially evident during the recent US midterm elections where political campaigns were paying high prices on CTV.

Adnimation’s software-as-a-service assists digital publishers and news websites with monetizing their digital assets by selling the advertising space programmatically to maximize ad revenue.

“It's more interesting for us to see a technological breakthrough than to see somebody who's already profitable,” he said, adding it doesn’t need help acquiring more clients.

Adnimation launched earlier this year a global solution that brings a variety of advertisers from the Google marketplace to the CTV world, Treves said. 

“We already operate this on several hundreds of TV channels, a lot of them are in Roku,” he said. 

The CBO said since a failed attempt at an initial public offering on the Toronto stock exchange in late 2021, Adnimation has received several inbound inquiries from strategic acquirers but politely declined.

That could still be an exit option, he explained, as there are several companies in the ad tech world that went public and have a lot of cash but lack growth. The executive also said it’s easier to buy a failing public company right now than to go public. With some of the work already done, it could consider the public markets once its valuation returns to near the CAD 100m mark, he explained, but it isn’t looking to hire an advisor, and it isn’t a focus. “Because of how the markets look right now, it's not very helpful for growth,” he said.

Adnimation has been “tempted” with offers by buyers and has considered an exit, he said, because it is both profitable and has a simple capital table with two co-founders which could make for an easy transaction. 

A bigger company that has some leverage could take Adnimation to new markets, Treves said.

Adnimation doesn’t need to exit, he explained, so it will continue to “ride out the wave,” he said, adding Adnimation intends to achieve double-digit growth annually with relatively low growth in headcount and overhead. 

In 2H21, Adnimation signed with Eagle 1 Capital to go public via a reverse takeover at a valuation of CAD 100m, he said. A few weeks before the closing date, the market started to turn south, he explained, including its benchmark companies in the Toronto exchange. The bankers wanted Adnimation to continue with the plan at a much lower valuation, but the co-founders decided against that, Treves said. 

In January, Eagle 1 announced the deal with Adnimation would not proceed. 

Public companies in the sector have lost 70%-80% of their valuation the past year, Treves said, adding it could have been “devastating” for Adnimation, as a newcomer, had it gone public.

Adnimation still achieved its profitability and growth goals for 2022 without taking investor money, he said.

He declined to disclose financials but said the bootstrapped company has been profitable since its first year when it started out of a garage.

In October 2021, Adnimation announced it had signed its largest contract in company history with a publisher that would generate CAD 11m annually in revenue. Sales were CAD 28m in 2020.

Adnimation has 25 employees.

Its sweet spot for customers is publishers with between one million and 20 million monthly visitors, which are substantial websites with original content, he said. Customers include The Babylon Bee, automotive-focused websites and some of the largest Chinese American websites with Mandarin content.

“We actually kind of grew a specialty in foreign languages in the American market,” he said.

Sixty-five per cent of its customers are in the US, he said.

Competitors are CaféMedia’s AdThrive and Mediavine, he said.

Adnimation’s law firm is Lipa Meir & Co.

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