Creator Economy M&A Forecast to Increase in Second Growth Cycle

After a turbulent period of irrational exuberance followed by skepticism, the creative economy appears poised for its second growth cycle, with M&A activity predicted to accelerate significantly in 2025. Chris Erwin, founder of RockWater, a firm of specialized M&A advisory focused on the creative economy, presented compelling evidence for this revival based on market dynamics, buyer behavior and fundamental changes in media consumption at last weekend’s 1 Billion Followers Summit in Dubai.

The creative economy has suffered a significant decline in recent years. According to Erwin, funding for creative economy startups fell 75% from $8 billion in 2021-2022 to just $2 billion between mid-2022 and 2024. This correction, while painful, has set the stage for more growth. stable and realistic estimates.

“We’re entering our second major growth cycle for the Maker economy,” says Erwin. “Many people can make a lot of money. That said, many can also lose a lot of money. The key is to choose to be better and not repeat the mistakes of the past.”

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RockWater’s analysis has identified three main categories where M&A activity is concentrated:

1. Owned and operated media companies

The digital publishing sector has been particularly active, accounting for 47 of the 90 deals tracked between 2022 and Q3 2024. Recent notable transactions include Brat TV’s acquisition of Electric Monster and Lad Bible Group’s acquisition of Betches at a premium multiple 13x EBITDA.

“What we’re seeing is not just consolidation within digital media,” explains Erwin. “Traditional entertainment companies, podcast businesses and financial sponsors are all getting into the mix.”

2. Marketing solutions companies

This sector saw the highest deal volume, with 135 transactions recorded from 2021 to Q3 2024. Digital marketing agencies represented 35 of these deals, attracting buyers ranging from traditional holding agency companies to financial sponsors. .

A prominent example is Publicis Groupe’s acquisition of Influential for $500 million, including earnings, at approximately 14x EBITDA. Erwin notes the importance of this deal: “Influencer was doing $150 million in revenue with 50% year-over-year growth. Scale and growth remain key drivers of value.”

3. Domestic CPG companies

While currently showing less deal activity, Erwin identifies this as a “dormant segment” poised for growth. Major corporations like Hershey and Keurig are already making strategic moves in this space. Meanwhile, companies like Epic Gardening and Feastables have raised significant capital ($18 million and $60 million respectively) to fuel growth.

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Several factors are in line to support increased M&A activity in 2025:

1. Strong stock market performance: “Local stock markets are breaking out,” notes Erwin, with many rising above 20% in 2024, indicating renewed investor confidence.
2. Mainstream adoption: “The Creator Economy is having mainstream success and awareness is at an all-time high,” says Erwin, pointing to unprecedented entertainment and sports partnerships.
3. Improved business models: Companies are now operating with “leaner business models, less OPEX and moving towards profitability,” according to Erwin.
4. Expanded buyer pool: “We’re seeing a lot more buyers in the market,” notes Erwin. “What’s also interesting is that the mandates of these buyers are changing. For the last two years, many of them were just kicking the tires. Now they have mandates from their leadership to transact and buy.”

The failures of the previous cycle provide valuable lessons for investors and operators. Erwin identifies some key pitfalls to avoid:

• Solutions in search of problems
• Undifferentiated business models
• High operating expenses with no focus on profitability
• Mismatched Investor Expectations

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For those looking to capitalize on this next wave of growth, Erwin emphasizes three basic principles:

1. “To attract capital, owners need to think from the ground up” – focusing on business fundamentals, revenue, profitability, growth and scalability.
2. Expect increased M&A activity in social publishers, digital agencies and native CPG companies.
3. Understanding buyer motivations and values ​​is essential to successful exits.

“We are at a very unique inflection point,” concludes Erwin. With valuations rising and demand for deals increasing, 2025 looks set to mark a new chapter in the evolution of the creative economy, characterized by more mature business models and strategic consolidation.

The message is clear: while opportunities abound, success will favor those who learn from past cycles and build sustainable, differentiated businesses with strong foundations. As the market enters this new phase, the emphasis on profitability, scalability and strategic fit will be more important than ever.