Sharethrough latest in slew of Canadian tech takeouts as adtech firm sells to France’s Equativ

As stocks of digital companies crashed in the fall of 2021, Jean-François Côté realized it wasn’t the best time to take his advertising technology company, Sharethrough Inc., public. The board postponed its initial public offering on the Toronto Stock Exchange, planned for that November, to wait until the markets rebounded.

They haven’t – and waiting is no longer the plan. On Wednesday, private equity-backed Smart AdServer SAS of France, known as Equativ, announced it had merged with Montreal-based Sharethrough. While the terms were not disclosed, the transaction is a takeover of Sharethrough that values the Canadian company at US$100-million to US$125-million, according to two industry sources familiar with the deal.

The Globe and Mail is not identifying the sources because they were not authorized to discuss the matter.

The deal is a familiar outcome for tech companies that went public or almost did during the pandemic. With valuations in a sustained slump, cash-rich buyout firms are feasting on software companies, often rolling them up together. Nine of the 20 tech issuers that went public on the TSX during the pandemic rush of 2020-21 have agreed to go private or delist.

“My vision was always to build a larger, global scalable platform,” Mr. Côté, Sharethrough’s CEO, said in an interview. “We looked at the alternatives, and the best option was to unify our vision and roadmap with Equativ.”

He will continue to lead Sharethrough “for now,” until the companies integrate, while Equativ CEO Arnaud Créput will head the combined entity. “I’m sure in the future I will have a meaningful role,” Mr. Côté said. “But I don’t know what it will be.” If Equativ does go public, it won’t be on the TSX, but rather the Nasdaq, “where the internet investors are,” he added.

The deal combines two similar companies with minimal overlap. Sharethrough is one of the largest independent supply side platform (SSP) providers in North America, operating an online exchange used to buy and sell automated, or programmatic, ads, which appear on the websites of publishers ranging from streaming giants to magazines such as Variety. It also manages programmatic ad campaigns for advertisers, agencies and brands. About 93 per cent of its business is in North America, with the rest in Europe.

Paris-based Equativ, meanwhile, is a top three SSP in Europe, with a minority of its business in the U.S. Equativ is larger, with almost US$125-million in annual revenues, compared with Sharethrough’s US$75-million. Both have bulked up via acquisitions in the past five years and have combined operating earnings of US$30-million, Mr. Côté said.

Sharethrough managers, including Mr. Côté, are rolling over half their stock in the deal. The company’s three outside investors – Fonds de solidarité FTQ, the Quebec government and Export Development Canada – are selling their combined half-share for a profit after investing $39-million.

When Sharethrough began the IPO process in 2021, it aimed to raise $75-million in an offering that would have valued the company at more than $340-million. But the stocks of rivals Magnite Inc. and PubMatic Inc. crashed that year and haven’t recovered.

Nonetheless, European private-equity firm Bridgepoint saw opportunity in the adtech space, buying Equativ in early 2023 and backing the Sharethrough deal. “In our industry, we love structural growth driven by structural factors that can be witnessed by anyone,” Bridgepoint partner Jean-Baptiste Salvin said.

A key value driver for Equativ and Sharethrough – which have increased revenues 20 per cent and 16 per cent, respectively, in the past year – is the ongoing shift in ad spending to digital channels. But another big change could favour SSPs.

Consumers are spending relatively less time online on “walled garden” big-tech platforms such as Alphabet-owned Google and Meta’s Facebook and more on streaming and internet TV sites on the “open internet,” owned by giants such as Disney, NBCUniversal and Spotify, adtech giant the Trade Desk said in a May report. The “walled garden” share fell to 39 per cent last year in the U.S. from 62 per cent in 2014, while the open internet share grew accordingly, according to research firm Trendstream’s GlobalWebIndex.

U.S. adults almost doubled their average daily consumption of streaming music and podcasts to three hours a day in 2023 from 2019 levels, while social media use grew by less than 10 per cent.

The Trade Desk report says demand for ad impressions among the top 500 open internet destinations, targeted by Equativ and Sharethrough, has grown faster than it has for the rest of the open internet, and internet TV is the fastest-growing major ad format in the U.S. Consumers there now spend an average of three hours a day on digital audio, compared with two hours on social media.

Despite the shift, Meta and Alphabet have seen their combined share of digital ad spending only dip to 46.6 per cent from 53.3 per cent in 2019, and social media sites still command 10 times the amount of ad spending as digital audio.

Meanwhile, research firm eMarketer predicts streamers will incentivize consumers to switch to ad-supported options from ad-free plans, as average revenues per user are higher.

That shift will benefit SSPs with global scale, Mr. Salvin said. “People are witnessing the benefits of spending digital advertising outside the walled gardens, and there will be a broad space for open internet players to develop.”