Insignia Buys Veritone One and Oxford Road // Makes $100M+ Podcasting Bet

Welcome to RockWater Roundup! Analysis to make you a better investor and operator in all things media, agency, and creator economy.

Hi readers,

Today we discuss Insignia Capital’s acquisition of Veritone One and Oxford Road, including the deal value prop, valuation estimate for each company, plan to create the world’s largest audio advertising agency, and what it signals for the broader podcast and audio industries.

Other quick hits:

• Read our 2024 RockWater State of the Union on Creator x Media advisory. We celebrate some wins, recap our 2024 client advisory work, and preview our 2025 growth plans.
• On Jan 11 2025 we plan to host a networking event at the 1 Billion Followers Summit in Dubai. I’ll also be giving a presentation on capital market trends in the creator economy. DM me if you’d like to attend.
• We just advised on the sale of two influencer marketing companies; Long Haul Management to Wasserman, and Bounty to gen.video. Good case studies for those of you also considering strategic options.
• It’s time for 2025 planning! → Our M&A and strategy team at RockWater specializes in advertising and IM agencies, digital publishers, and social channels. DM me if you need help on valuations, budgeting, growth strategy, or running a buy or sell-side M&A process.

Onward,

Chris, Founder of RockWater

Insignia Pays $100M+ for Veritone One and Oxford Road

Insignia Capital bought Veritone One and Oxford Road.

The $100M+ deal creates the world’s largest audio ad agency. It’s also major validation of the podcast market opportunity.

Also of note, RockWater acted as non-exclusive financial advisor to Oxford Road and its CEO Dan Granger early on when they were first evaluating strategic options (we didn’t advise on the specific Insignia discussions). That means I can break down deal info based on what’s publicly available, but can’t do a full valuation and financial analysis like I normally do.

Let's get into it...

💰SELLER #1: Veritone One

• Performance audio and video influencer agency
• Channel focus: podcasts, YouTube, radio, streaming, influencer, digital
• Parent co is Veritone (see overview below)
• 40k+ creator relationships
• Based in Irvine, CA
• 100+ employees

Corporate History (via parent co M&A)

• 2016 created via acquisition and rebranding of ROI Media Direct
• 2018 acquired Performance Bridge

3Q YTD Financials (PE 9.30.24)

• Total revenue of $23M, up 12% YoY from $20.5M
• Total non-GAAP NI of $9.35M, up 80% YoY from $5.2M

Other Financials

• Implied $11.7M TTM 9.30.24 EBITDA based 8.9x valuation multiple
• Was 24% of parent co revenue for YTD 9.30.24

💰SELLER #1 PARENT CO: Veritone

• Enterprise AI software, applications, and services provider
• Based in Irvine CA, with offices also in London, NYC, San Diego, Seattle
• Founded 2014 by CEO Ryan Steelberg and Chad Steelberg, two brothers
• Clients in commercial and public sector
• Publicly traded on NASDAQ: VERI
• 35 US and foreign patents
• 500 employees (post sale)
• 3,000 customers (post sale)

Stock performance as of 11.4.24 at 10:57am ET

• $3.35 share price
• Mkt cap of $127M
• Down 20% since 10.17.24 deal news
• Up 84% YTD
• Up 30% YoY
• NOTE: data is before post-election market surge

Financials (post sale)

• 2024B revenue of $95.3M
• 2024B net loss of ($35.7M)
• 2025E revenue of $114M, up 20% YoY
• 2025E net loss of ($20M), down 44% Yoy
• $65M of ARR
• Total debt of $134.4M, down from $168.7M on 12.31.23
• Total C&CE of $27.3M, down from $79.4M C&CE on 12.31.23

💸SELLER #2: Oxford Road

• Podcast advertising agency
• Founded 2013 by Dan Granger
• No outside equity capital prior to sale
• Core services are media, messaging, and measurement
• Helped scale early DTC co’s into $1B+ brands like ZipRecruiter, Dollar Shave Club
• Audio thought leader via O&O newsletter, white papers, conferences, and podcast
• 50-75 employees
• Based in LA

💸BUYER: Insignia Capital

• Growth PE fund
• Focus on biz services, consumer value chain services, consumer products
• Also backer of New Engen, a digital agency doing M&A rollup
• Target US and Canada-based companies
• $6B in completed transactions

Investment Criteria

• $5M+ EBITDA
• $20M+ revenue
• $20-100M equity investments
• Historical growth, profitability
• Majority and significant minority
• Significant owner / founder rollover

🤝DEAL DETAILS

• Simultaneous sign and close on 10.17.24

Veritone One

• Total potential price = $104M
• $59.1M in cash 
• $6.7M in escrow
• $20.3M in purchase price adjustments
• Up to $18M cash earnout based for CY 2025
• 3.5x revenue multiple (9.30.24 TTM)
• 8.9x EBITDA multiple (9.30.24 TTM)

Oxford Road

• Deal details were undisclosed
• See my valuation notes below…

💎DEAL VALUE PROP

• Form world’s largest podcast group and leading creator-based media entity
• Transform how brands leverage audio and creator-led content for measurable results
• Combine OR’s int’l traction and industry innovation with VONE’s tech stack, data capabilities, and creator-led video and influencer expertise
• Enable ex parent co Veritone to focus on AI software, products, and services, and pay down debt

✍️POST DEAL OPS

• Both VONE and OR to operate independently in near term, will unify under one brand in future
• OR founder / CEO Dan Granger to be CEO of combined org
• Cash proceeds from sale to repay $30.5M principal of term loan, plus accrued interest and prepayment premiums of $3.3M

🤔WHAT ELSE I FIND INTERESTING & DEAL INSIGHTS

RockWater’s relationship with Oxford Road…

RockWater acted as non-exclusive financial advisor to Oxford Road and its CEO Dan Granger early on when they were first evaluating strategic options related to M&A. Our team is therefore thrilled to see this deal happen - we’re strong believers in audio, podcasting, the combination logic, and in Dan and his leadership team. 

Here’s a quote from CEO Dan Granger: 

"Chris and the team at RockWater were in our corner concepting this deal at a critical phase, when it could have gone in many other directions. We're grateful for their partnership!"

Dan, the feeling is mutual ;)

Of note, we didn’t advise on the specific Insignia discussions and aren’t privy to OR’s final non-public sale data. Nevertheless, we still have to be sensitive to sharing any private company financial info in our analysis below.

Estimating valuation for each of Veritone One (VONE) and Oxford Road (OR)…

We have deal details on the sale of Veritone One because its parent co, Veritone, is a publicly traded company on the NASDAQ (VERI). Therefore, deal structure and valuation for Veritone One were reported in Veritone’s 8-k public filing and investor update presentation about the sale.

What we know…

Total VONE potential price = $104M

• $59.1M in cash at closing
• $6.7M in escrow
• $20.3M in price adjustments (perhaps positive WC adjustments, tax assets, etc)
• $18M cash earnout based on CY 2025 revenue targets; structured as a step function with payouts ranging from $3M to $18M based on four net revenue thresholds between $31M and $35M

Overall, this means $86.1M in guaranteed cash payments, assuming release of escrow funds if certain conditions are met per purchase agreement, likely within a 1 to 2 year timeframe.

That’s 83% of the $104M total potential purchase price. The $18M earnout is 17% of the total purchase price.  

Of note, the investor presentation said all deal consideration is in cash, which implies no rollover equity or equity in new combined VONE / OR entity. This makes sense since parent co Veritone sought a clean exit to (1) focus on its core AI business and (2) free up cash to pay down debt. That being said, equity incentives were likely given to VONE leaders and team who came over, likely via a management incentive plan (MIP) and/or employee stock option plan (ESOP).

VONE Valuation Multiples as of TTM 9.30.24

• 3.5x revenue (implies $29.7M revenue)
• 8.9x EBITDA (implies $11.7M EBITDA)

This is another great data point for digital agency M&A, where there’s been a lot of deal activity over the past couple years (just read our blog). But more critically, it’s a great datapoint for the podcasting industry, where there’s been very limited M&A activity of sizeable, attractive businesses since 2022 (marque podcast deals that year included Acast’s acquisition of Podchaser for $34M, and Team Coco’s $150M+ sale to SiriusXM). 

This data is also very helpful to estimate OR’s valuation. OR was privately owned and didn’t raise any outside equity capital, and there was no valuation info reported in the deal press release. 

Though as I noted above, even despite not being part of the Insignia deal talks, as a past advisor to the company and CEO, I have to be sensitive about what I can share. 

How to Estimate OR Valuation

• OR is smaller than VONE, so assume revenue and EBITDA is lower than VONE’s $30M and $12M, respectively
• Agency EBITDA margins don’t scale linearly due to fixed costs leverage, so assume EBITDA margin is lower than 40%
• Assume VONE got a purchase price premium relative to OR due to its larger scale and higher EBITDA margin, perhaps 10 to 30%, so adjust valuation multiples accordingly
• Most agency businesses in today’s market are valued based on EBITDA, so I give more weight to the EBITDA multiple
• The directional math estimates a purchase price range in the low to mid 8 figures. You can narrow in as you tweak the assumptions above

How to think about OR deal structure

One might assume it’s the same as VONE, with 83% in guaranteed cash and 17% in earnout. But of note, the seller dynamics between VONE and OR were different, and could imply a different deal structure. 

Specifically, VONE had a parent co (1) with a separate core business focus and (2) that prioritized cash proceeds from a sale. Per public filings and stock market data, the Veritone parent co faced some challenges via a depressed stock price (down over 90% since 2021 highs), high debt levels, and a need for cash to meet its debt obligations. Therefore, VONE made much more sense under a new owner -- the divestiture was a great chance for the parent co to unlock cash, and for VONE to grow in combination with a more strategically-aligned company like OR, and with an investor who’s an expert in financing and growing B2B services businesses.

In contrast, OR was privately owned by a single founder in Dan Granger, with one main business model focus as an audio ad agency. Further, Granger has been consistent in his industry thought leadership and public communication about his intent to continue building in the audio space for years to come, and his belief that there’s much growth opportunity ahead.

Consider those dynamics together with the fact that Dan is now the CEO of the combined VONE and OR businesses, and that on Insignia’s website it states that the PE fund’s investment criteria includes “significant owner / founder rollover”. For PE acquisitions where the acquired leadership takes a meaningful role post deal, industry standard for rollover equity is typically 20 to 40%. There is thus good reason to believe that Granger rolled over a meaningful amount of equity into the new combined company. For the OR deal, I’d assume it’s closer to the higher end of this range. 

But, there could also be a scenario where Granger rolled over more than 50% of his ownership of Oxford Road, which due to VONE's larger deal size and valuation, would still give Insignia majority ownership and thus control of the new combined co. It would also reduce Insignia’s cash commitment upfront to buy two significant ad agencies, mitigate the deal’s downside risk, and also strongly incent Granger to grow the new combined business.

It’s yet another potential scenario. Again, I’m just speculating here, but these scenarios are fun thought exercises to work through.

Go-forward operating structure of holdco with 2 different ad agency brands…

The deal press release noted that the two agency brands will operate independently in the near term, but will unify under one brand in the future. 

There was a formal M&A sales process run for VONE, which means that there were other bidders looking at the deal. Insignia was able to orchestrate a unique transaction by also acquiring OR, but orchestrating an integration of both companies will take time, and I bet Insignia didn’t want to slow down negotiations and put its double bankshot deal at risk.

So, Insignia likely made a strategic decision to get both deals done around the same time, and put the full integration plan on hold so as to not lose the deal to other bidders. Currently, I bet there’s a ton of internal work being done to sort out the integration plan ASAP, and I expect there will be a formal announcement in 1H 2025. 

There’s a lot to think through in combination. Some questions the teams and new ownership will have to work though…

• What is the new combined growth plan based on market opportunity and core strengths of each individual business, and strengths via combination?
• Will there be a new company name, brand, and positioning to market? Of note, the VONE purchase agreement (shared in an 8-k filing) lists the buyer entity as Oxford Buyer, LLC and its parent co as Oxford Parent Holdings, LLC – considering Veritone parent co’s duplicative name of VONE, and OR’s good reputation in the market, my guess is that OR will be the brand that remains post integration
• What will the new combined team org be; what hiring gaps will need to be filled, where are redundancies, and which leadership will be elevated?
• How to manage client conflict in certain advertiser categories e.g. two DTC or SaaS clients that are direct competitors with one another?
• How will internal systems, proprietary technology, 3rd party software, ad stack, and overall processes be integrated?
• Does VONE have any dependencies with its former parent co VERI related to tech or other systems? If so, how will these be terminated / replaced?
• The VONE agency was first created through M&A, including the 2016 acquisition of ROI Media Direct, and Performance Bridge in 2018. Are these businesses fully integrated, or is there added work needed here?
• …and much more

I’m sure there’s precedent for similar situations, but I’m not personally aware of them. I’m therefore eager to track how the new leadership executes here; it will be a great learning for us industry observers and advisors!

Long-term audio listenership and ad market growth data is compelling…

Here’s the facts. 

The US podcast ad market grew slower in 2024 than expected, decelerating from prior years. It’s expected to reach $1.9B, up from $1.8B. Further, there were many improperly capitalized podcast and audio co’s over the last 5 years – valuation and growth expectations didn’t match the market opportunity (I explain this dynamic here in the podcast section of my March 2024 annual report). 

Unfortunately, the bad dealmaking left a bad reputation with investors.

But there's lots of upside in the podcasting and audio market. My fave audio stat = audio commands around 21% of consumer media attention, but only earns 5% of media ad dollars. A massive opportunity as that gap compresses!

Further, the podcast ad market is expected to grow at a faster rate in the coming years, and reach over $2.6B by 2026. And the global audio ad market will be around $40B this year, and will continue growing over the next few years.

Which leads to my next point…

This deal helps validate the podcast market opportunity…

Kudos to Insignia for taking this leap. 

For the past couple years and through 1H 2024, many PE firms and investors believed that the audio ad market was too small and too low growth for a rollup -- I know from direct convos via our audio client work!

But now, this double bank shot deal is turning a lot of heads, and piquing the interest of many investors who were previously on the audio and podcast sidelines. With capital markets ripping over the past week based on election results and the anticipated business-friendly environment, combined with this landmark audio deal, I’m excited to see more capital flow into the audio space in the new year.

Fortune favors the bold. I’m rooting for Insignia to get a big win here.

An insight on PE buyer, Insignia Capital…

Insignia is the same PE fund that backs New Engen, which is also doing a digital agency rollup and recently bought Donut Digital (my deal analysis). They’ve also completed over $6B of transactions.

i.e. they’re not newbie agency and B2B service company investors. They’re worth watching and perhaps learning from.

Where does this leave Ad Results Media, the 3rd leg of the podcast ad agency stool…

ARM is another major audio ad agency, owned by Shamrock. In terms of revenue and team size, I put them somewhere between VONE and OR.

Might they also get folded into the VONE and OR mix? 

That could be complicated considering the existing Shamrock ownership – it makes me wonder if Shamrock and Insignia share any other portfolio investments. Also, TBD if there’d be anti competitive concerns since the combined biz would control a significant majority of the podcast ad market (going from duopoly to monopoly), thought that might be mitigated based on the smaller combined scale of said market size and that these businesses do have other services lines, though I’d have to defer to a legal expert there.

At a minimum, the competitive market for ARM’s services just changed drastically. Its two direct peers are now likely more difficult to compete against as a combined company since they now collectively boast more ad and consumer data, more combined services offerings, and more resources. 

Though there could be opportunity in acquiring customers who churn out from VONE/OR based on perceived client conflict. Where there’s change, there’s opportunity. 

Curious how this dynamic will pan out. 

Alright, that’s enough deal analysis for this week.

I'm the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.

DM me on LinkedIn or email me chris @ wearerockwater dot com