What you need to know:

• Bailador has found a buyer willing to pay $20 million in cash for its stake in SMI.
• The premium agreed values SMI at anywhere up to $100m.
• Market participants tipped Nielsen as the most likely buyer, with the firm making several similar deals in recent years.
• However Mi3 understands Nielsen is not behind the deal.
• The transaction is subject to foreign investment regulatory approval.

Bailador, the ASX-listed tech investment fund co-founded by former Fairfax Media CEO David Kirk and Paul Wilson, has agreed to sell its stake in Standard Media Index for $20m in cash.

The sale represents a significant premium on the fund’s listed valuation of its stake at $12.1m last month and follows a glowing note back in September, which stated SMI was “flying on a higher growth plane.”

“As we have learned on the journey with the SMI team it takes time and perseverance to access data, harmonise massive data sets, build products and make large enterprise sales,” the fund wrote.

“After many years of steady growth and growing cash profitability, the 2021 calendar year has seen the company shift onto a new higher growth plane. As is often the case with companies in the portfolio, accelerated growth at SMI has come from new product development and taking current products to new markets.”

That update clearly served to whet investor appetite. But the sale, cash premium, and as yet unnamed buyer raise interesting questions about the future of media agency spend as a currency.

Nielsen hunting?

Market observers suggested Nielsen, which locally is fighting to regain ground after losing the flagship IAB online measurement contract to rival Ipsos and which has historically faced challenges in estimating digital media spend, could be a potential suitor.

Nielsen four years ago paid £26m (A$46m) for Ebiquity’s ad monitoring, verification and insights divisions in Australia, Germany, the UK and US. But that did not include media auditing and pricing benchmarking.

Four months later, Nielsen swooped for Landsberry & James, an Australian-based media booking, billing and analytics software firm in a bid to get a better view of ad spend across TV digital and radio.

However, Mi3 understands Nielsen is not the buyer of Bailador’s stake.

Other market participants believe increasing fragmentation of media spend data, with major retailers such as Woolworths and now Coles becoming media businesses and similar trends developing – or further developed – in markets such as the US and UK, may further alter the current landscape.

Meanwhile, major changes to the digital ad ecosystem – such as the sunsetting of cookies next year, followed by Google’s moves to emulate Apple in making Android a ‘privacy-first’ mobile operating system – has sparked a scramble for alternative ways to measure and attribute ad dollars.

That could prove an ironic twist, given SMI data has been around almost 15 years, but may explain the premium now being offered to Bailador. However, it could ultimately prove to be a transaction between private equity funds.

It’s not clear how much of SMI Bailador holds, though as largest minority shareholder, and applying the premium agreed, the business is worth at least $40m, if that shareholding stands close to 50 per cent. If 20-30 per cent, suggested as feasible by one person with knowledge of the business, SMI’s valuation would stand between $65m and $100m.

Media merry-go-round

SMI compiles advertiser spends via media agency invoices.

Strongest in North America and Australia, and with some coverage across Europe, its key clients have been publishers, platforms, rights/content owners as well as brands and financial institutions. Media agencies subscribe to the service to better understand market share, pricing, create benchmarks, build media mix models and to produce market intelligence reports based on the category and channel data provided.

The company was founded in 2009 by former media editor of The Australian Jane Ractliffe, nee Schulz, and entrepreneur Sue Fennessy.

Bailador invested two years later. By 2013 Kirk and Wilson were joined by the likes of former Chairman and CEO of Endemol Ynon Kreiz, former ITV CEO Sir Charles Allen, ex-Goldman Sachs exec and GCI founder, Steven Sher and Naomi Seligman, a board director at Oracle, among some 30 investors in total.

Jane Ractliffe still heads the AUNZ operation. Sue Fennessy exited in 2014 to launch social platform WeAre8  – backed by the UK’s Channel 4, venture capital fund Centerstone Capital and ex-footballer Rio Ferdinand – though her husband James Fennessy runs SMI globally out of New York.

Meanwhile, WeAre8 has just hired former Nine MD of local markets and group marketing, Lizzie Young, to helm its Australian operation.

What the next move heralds, and who the buyer turns out to be, could prove instructive.