Madhive said it agreed to acquire Frequence and plans to build the combination of the two ad-tech companies into the omnichannel leader for local media companies and agencies.
The deal would combine Madhive’s decisioning, bidding and device graph back-end capabilities with Frequence’s user interface, which enables media companies to sell, manage and execute multi-screen digital marketing campaigns.
The companies said their assets are a good fit with little redundancy and should accelerate their growth as a full-service, end-to-end provider.
Madhive already handles millions of dollars in connected TV and digital video spending for clients such as the Fox, Tegna and E.W. Scripps station groups.
Frequence’s workflow tech enables Spectrum Reach, Hearst Television and Beasley to execute campaigns for their local advertising clients.
Financial terms of the deal were not disclosed. Combined, the companies have about 500 employees.
Madhive built its technology to activate any type of digital media,” Madhive CEO Spencer Potts told Broadcasting+Cable.
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“It was purpose built for local and CTV because we thought that was the biggest area for us to be able to grow as rapidly as possible, and we were making a bet that CTV would start to grow parabolically,” Potts said.
Goldman Sachs last year made a $300 million investment in Madhive. That investment was made based on the financial success and stock market earnings multiples being commanded by companies like The Trade Desk and Magnite in the national market, Potts said.
Potts said the transaction was not made because of the consolidation going on in the ad-tech space.
“This was let's be proactive and take two businesses that have been innovators in the exact same space, working with a lot of similar customers, and turbocharge it, put it on nitrous so to speak,” he said.
“We're not doing this for synergistic gains, because we can cut head count. That’s not it,” added Tom Cheli, CEO of Frequence.
“I don't want to be too cliche, but it's kind of like. ‘hey, that's my long lost brother,’” Cheli said. “Both of us came in with the similar approach and are looking at the same opportunity.”
Potts said that the two companies started talking after Madhive head of sales
Kristin Wnuk noticed Frequence’s work with local broadcasters, an area Madhive coveted.
Initially, Madhive sought to be one of the ad servers Frequence and its clients used.
More conversations ensued at the Consumer Electronics Show in Las Vegas in January and eventually the possibility of a combination started to be considered, Potts said.
Both companies saw a huge opportunity in local markets and their technology was complementary, with nothing that needed to be thrown out, Cheli said.
“We said this is exactly what we’re looking for to elevate and accelerate our business to the next level,” Cheli said. “They have this great culture and these great people and then, the icing on the case is the financial piece. It checked every box.”
Being larger in terms of revenue and earnings, Madhive is the acquiring entity in the transaction.
“Conceptually, Tom and I very much consider this a merger of equals,” Potts said. The combination is “another step for us to become the digital advertising hub for local businesses and SMBs [small- and mid-sized businesses],” he said.
Madhive’s 12 to 18 month product road map called for building a front end for managing campaigns. Adding Frequence means that job is done. “Tom and his partners had built an extremely elegant solution to give smaller local businesses tool set that are the equivalent of the ones larger national advertisers are able to play with,” Potts said.
Eventually, larger companies might try to move into the local omnichannel ad-tech market, but Potts thinks Madhive has a big advantage after adding Frequence.
“Everyone’s trying to figure it out. I think we figured it out,” he said. “We think it's exceptionally difficult and we have five, six, seven years of a head start building a very robust decisioning engine that's able to kind of take in all the machine learning and AI to get where we are.”
They want to go further, using their tech to help local and regional businesses expand into additional geographic territories.
“We have a lot of work to do,” Potts said. “Tom and his team are coming in, so we're wasting no time. We're getting right to it. getting everybody pumped,” he said.
“If we can be the digital advertising hub for local businesses and SMBs, there should be a number of different people that either want a partner or purchase,” Potts added.
Moelis & Co. is acting as exclusive financial adviser and Wilson Sonsini Goodrich Rosati is providing legal counsel to Frequence. Latham and Watkins is acting as legal counsel to Madhive.
