Nexstar Media Group has announced plans to acquire ad tech specialist LKQD Technologies, for $90 million in cash.
The terms are subject to working capital and other adjustments, including a minimum cash balance of $10 million, and a contingent earn out payment based on LKQD’s performance at the end of two years under Nexstar’s ownership. The transaction is expected to be immediately accretive to Nexstar’s operating results and free cash flow, does not materially alter the company’s leverage position and will be financed with cash generated from operations and funds provided by the company’s revolving credit facility.
LKQD’s infrastructure as a service (IaaS) technology provides end-to-end systems for ad serving, mediation, programmatic auctions and advanced reporting, allowing publishers to book, manage, optimise and track their operations in real-time from one dashboard. It reaches approximately 115 million US online video viewers across desktop, mobile-web, mobile-app and connected TVs, meaning it has the largest reach in the US to viewers across digital devices according to the comScore Video Metrix. Combined with Nexstar's audience reach across 170 local TV stations and 100 US markets, the combined company will allow Nexstar's advertising clients to target their customers across both the television and digital video landscapes.
Over the past 12 months, LKQD expanded its technology to meet increasing demand for its products and solutions among digital publishers, media partners and advertisers. As a result, in the first half of 2017, LKQD tripled the number of customers using its platform and generated year-on-year gross revenue growth of 180%, outpacing overall video advertising industry revenue growth by a multiple of eight.
“Our acquisition of LKQD is consistent with our long-term strategic and financial growth objectives for Nexstar Digital as we unify, expand and invest in our technology platform to optimise results for our clients, while developing new revenue opportunities,” said Perry Sook, chairman, president and CEO of Nexstar. “By adhering to our disciplined acquisition and integration criteria, we are acquiring the leading, fast-growing, profitable, online video advertising business at an attractive, accretive valuation. Looking ahead, we continue to evaluate additional digital investments and select accretive transactions to drive the next phase of growth and success for Nexstar Digital.”
Senior members of the LKQD management team, including CEO and co-founder Brian DeFrancesco and CTO and co-founder Christophe Clapp, have entered into employment agreements with Nexstar, and LKQD will continue to operate its growing business as a division of Nexstar Digital.
“This is a win-win for clients on both sides, as Nexstar’s suite of local and national digital marketing products, content monetisation solutions and digital services combined with LKQD’s end-to-end digital video advertising infrastructure technology, will allow small and mid-sized media publishers and businesses to maximise revenues across every available channel,” said Brian DeFrancesco, CEO of LKQD. “Nexstar Digital has a strong position in the rapidly growing digital media and advertising technology market and we are excited to join their team as Nexstar’s resources and expertise will help power LKQD’s next phase of growth as we continue to expand our brand, technology capabilities and market presence."
The transaction is expected to close late in 2017 or the first quarter of 2018 and is subject to Hart-Scott-Rodino (HSR) approval and other customary closing conditions.
The news comes a few months after the FCC approved Nexstar’s merger with fellow local TV powerhouse Media General.