For decades, corporate development and private equity has been powered by models that assume the past is a reliable guide to the future. Multiples of EBITDA, linear growth projections, and cost-synergy models have defined how firms in advertising, AdTech, and Martech have been valued. These frameworks made sense in an era when disruption was cyclical, technological shifts were incremental, and the arbitrage of billable hours provided a predictable baseline for value creation.
But we now find ourselves in an age defined not by continuity, but by collapse. AI isn’t a new “efficiency lever,” rather it’s a profound reconstitution of the industry’s entire value chain. AI is atomizing creative production, rewriting the rules of media buying, compressing once-scarce capabilities into commodities, and shifting the value equation from executional scale to proprietary data, brand trust, and human ingenuity. With this as the foundational context, legacy valuation methodologies no longer simply fall short; they fail outright.
The Mirage of EBITDA in a Post-AI World
Traditional M&A modeling relies on EBITDA as the anchor for multiples. Yet EBITDA assumes costs scale somewhat proportionally with revenue. AI effectively obliterates that premise. When a single prompt can replace hundreds of hours of production work, the marginal cost of output approaches zero. A firm’s historical cost structure, often the key driver of its “normalized” EBITDA, no longer reflects its future trajectory. The risk is that buyers either significantly overpay for businesses whose EBITDA is about to implode or significantly undervalue those uniquely positioned to expand margins via AI leverage.
Revenue Quality and the Erosion of Scarcity
Valuations have historically emphasized “recurring revenue,” “project vs. retainer,” and “predictable pipelines.” But AI-enabled commoditization means that not all revenue is created equal. The ability to generate campaign creative, performance optimization, or even full-funnel media planning at scale has collapsed scarcity. In this world, the real question becomes: which revenues are defensible? The valuation premium should flow not to size or duration of contracts, but to revenues tied to proprietary algorithms, closed ecosystems and data integrations, which lead to deep client reliance and value based upon outcomes, not hours.
The Death of Synergy Math
Private equity and corporate development teams have long relied on synergy-driven models to justify acquisitions. Cost takeout from headcount reduction, scale, and shared overhead were key drivers. AI makes “synergy math” slippery. If a machine can collapse production costs by 70%, what remains to “take out”? The value shifts from integration synergies to innovation synergies What happens when two firms combine data sets, machine learning models, or proprietary workflows? This requires a completely different lens than the mechanical additive approach of legacy models.
A New Valuation Paradigm
In an AI-forward landscape, valuation has to move beyond static multiples. A future-proof approach demands:
- AI-Leverage Indexing: Weighting how well a firm integrates AI into its operations and where it sits on the adoption curve.
- Defensibility Metrics: Assessing proprietary data assets, evaluating the uniqueness of a firm’s data flywheel, its ownership of insight-rich behavioral signals, and how deeply its AI models are embedded into client workflows and outcomes.
- Adaptability: Measuring cultural and organizational capability to reinvent as technology accelerates.
- Value-to-Cost Curve Modeling: Not simply projecting revenue growth but modeling how the marginal cost of delivery changes under AI adoption.
The future of M&A as it directly relates to companies delivering solutions within the digital ecosystem can’t be based on the methods of the past. Legacy models were built for incrementalism, not discontinuity. AI is not another efficiency driver to plug into discounted cash flows; it’s the reordering of the industry’s physics. The method of valuation must become less about arithmetic and more about foresight, measuring impact, not billable hours and incrementality.
To learn more, you can reach the author, Bob Morris, Managing Partner, at bob.morris@bravery.group.
