Mergers and acquisitions (M&As) can be a beneficial but challenging undertaking in any industry. Even after months of careful planning, businesses must monitor their M&A’s success to determine any necessary strategy changes in the future. That’s not always as easy as it seems, especially in the digital content industry.

Digital media M&A activity is surging. Deal values in the industry increased by 56% in H2 2023 over 2022 figures, and growing confidence in a recovering economy will likely push things further in the future. Consequently, it’s more important than ever for businesses in the sector to learn how to evaluate the success of their mergers. Here are some key factors to consider.

Financial Metrics

A company's post-merger financial performance is the most obvious factor in evaluating M&A success. These metrics apply to mergers in any sector, and the digital content industry is no different.

Revenue, net income and profits are the biggest key performance indicators (KPIs) under this umbrella. Naturally, the larger these figures are, the more successful the M&A was, but it’s important to view these in context. The acquired company almost always grows faster than the buyer, with target company shareholders seeing a 20% return on average a week after the deal and buyers seeing a 1.6% loss.

It will take time for revenue or profit growth to show meaningful results, and what constitutes a strong performance varies between sectors. Always compare these factors to current industry levels to view them in context.

User-Focused KPIs

As important as financial metrics are, they don’t provide a complete picture. Customer behavior is another crucial part of the puzzle. In the digital content industry, that means looking at user engagement.

M&As are often advantageous for user-focused matters because they make targeting new demographics easier, as one company can benefit from the established audience of the other. Of course, that doesn’t always happen, so it’s important to track user behavior closely.

KPIs under this umbrella can vary depending on the specific kind of content company in question. Social media platforms should consider the number of active users, daily interactions and new user growth. Media producers can analyze their average views, subscriber growth, viewing session length and premium spending. Some metrics — like customer satisfaction ratings and churn — apply to all businesses.

Platform Growth

The content platform’s growth is a similar indicator of a successful merger in this industry. Specific KPIs here include the size of the overall user base, the ratio of new vs. old users and average ad impressions or similar revenue growth.

What exactly this growth looks like may vary depending on the kind of M&A. Theoretically, if two separate content platforms merge into one, strong growth would be an eventual subscriber count greater than the sum of the individual sites. However, not every merger works like that, so that benchmark isn’t applicable everywhere.

Consider Meta’s 2012 acquisition of Instagram. Meta kept Facebook and Instagram separate despite the latter generating no revenue at the time. Since they were separate, the user count of one had little direct impact on the other, but Instagram now generates more ad revenue. Both sites also have substantially more users, but their growth followed separate trajectories.

Technology Factors

Post-merger technology integration is another important factor to consider. Bringing two digital content companies together ideally will result in a higher-functioning tech stack for employees and customers.

On the internal side, the merger should streamline processes and let employees accomplish more. Teams today use as many as 110 software apps, and that may not include unauthorized “shadow IT” that workers use. A successful M&A should reduce that number by enabling more functionality through consolidation, not increase it.

Users should experience some technological improvements, too. Specifics vary depending on what kind of tech the business acquired, but common ones to consider include faster load times, increased site functionality, streamlined searches and integration with other apps.

Common M&A Challenges

Finally, digital media companies can gauge an M&A’s success by how they handle common merger-related issues. Up to 90% of mergers fail, offering plenty of evidence for what organizations typically struggle with. A merger that can address and overcome these barriers is a successful one.

Cultural clashes are some of the most common issues to watch. A successful M&A will result in a cohesive company culture with minimal employee churn where workflows on both sides adjust to become more efficient. In many cases, though, separate workflows disrupt each other and disjointed management styles drive employee turnover and limit collaboration.

Similarly, communication issues are common in mergers, so it’s a good sign if employees can communicate well and managers understand their teams’ needs post-merge. Security gaps, bloated tech stacks and regulatory challenges are other issues to look for.

M&A Success Is Increasingly Important in Digital Content

Many M&As fail to meet their goals because the targets themselves are unrealistic. When companies know what to expect and how to determine success more accurately, they can find success.

As M&A activity in the digital content industry rises, these considerations will become increasingly important. Businesses must learn what a successful merger looks like now to ensure growth down the road.