Independent ad server, Sizmek, files for Chapter 11 Bankruptcy

Adtech giant's slowing revenue and inability to find fresh investment see company filing to bankruptcy protection

Ad server adtech player, Sizmek, has filed for Chapter 11 bankruptcy as its continues to try and overcome its financial woes in the midst of adtech consolidation.

The company’s board of directors confirmed it along with seven affiliated debtors had initiated Chapter 11 proceedings in the US Bankruptcy Court, a moved taken to preserve company value while it looks to find alternative business funding arrangements. The group includes X Plus One and Two Solutions, Point Roll, Wireless Artist and WirelessDeveloper.

“The company is aggressively seeking to access its existing cash, and intends to fully resume normal course operations as soon as possible,” it said in a statement.

The company is claiming debtor’s aggregate debt is just over $2.5 million and estimated both assets and liabilities to be worth at least $100 million. Its top five creditors among a list of 60 unsecured claims are Index Exchange ($8.9m), PubMatic ($7.3m), OpenX Technologies ($5.9m), AppNexus ($5.2m) and Google ($4.5m). The company estimates between 1000 and 5000 creditors in total.

Sizmek is one of a number of adtech companies to be acquired by private equity – this time Vector Capital – which picked up the business in August 2016 in a deal worth US$122 million. Yet according to a report in AdExchanger, Vector has been unwilling to front up further cash to support Sizmek’s business model. This, combined with softer revenues, has led to the Chapter 11 decision.

“In the months preceding the filing, Sizmek has been in extended discussions with its stakeholders regarding their continued support of the company as its pursued various strategic alternatives to address its over-leveraged balance sheet,” the company stated.

“Despite these ongoing discussion, the company’s primary lender took control of the company’s bank accounts and sought to diver customer receivables, therefore cutting off access to capital.”

Sizmek has been a high-profile player in the rapid rise and proliferation of adtech solutions, securing millions in investment and making a number of significant acquisitions to bolster its position in what’s been a highly tumultuous space. The most notable of such acquisitions was the US$145 million purchase of Rocket Fuel, rounding out its programmatic advertising suite capabilities.

Previous acquisitions included mobile DSP, StrikeAd, for US$11.7 million, as well as PointRoll for US$20m, a multi-screen digital adtech and services company  that produced technology for customising ads based on inventory, demographics and location.

Yet a report posted on AdExchanger in early March suggested Sizmek required another investment round after facing setbacks and revenue shortfalls in the past year. The report claimed the directors had been unable to get the funding from Vector Capital, and suggested Sizmek was now working with Cerberus Capital Management, which financed the debt to secure the Rocket Fuel deal, for find another investor.

In a statement on its website to customers, the company stressed it remained open for open for business and would be looking to a number of options to continue that way. Top of the list now looks like a sale. Sizmek’s competitive landscape includes Google, Celtra, Flashtalking, Adform and Adobe Media Optimizer.

“The US Chapter 11 process – unlike bankruptcy schemes in other geographies – is specifically designed for companies like ours to operate as usual while working to resolve financial issues,” it stated.

“Sizmek’s Board and management team continue to explore all available options, including a potential sale of our business.”

In its recent magic quadrant for adtech solutions, Gartner placed Sizmek in the ‘visionary’ quadrant, noting the vendor’s strengths included workflow efficiency, performance marketing excellence and the ability to serve the SMB market but also its lower level ability to execute. Weaknesses included the fact that the DSP product had recently been overhauled, product reliability and below-par technical support.

Gartner’s definition of adtech is platforms that can manage advertisements across channels and offer functions such as targeting, campaign design, bid-management analysis, optimisation and automation of digital advertising.

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+:google.com/+CmoAu       

 

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