THE NORDICS
Q&A: BEN ROBINSON,
DIRECTOR, RB CAPITAL
NPDs, FTDs, EBITDA or KPIs; no acronym can explain or shed light on the complexities of selling a
business. With more and more affiliates looking to cash in by selling their companies to groups such
as Catena or GIG, iGB Affiliate speaks to Ben Robinson, co-founder of corporate and M&A advisory
specialist RB Capital, to hear about the key drivers behind the current M&A wave and how affiliates can
best prepare their business for a sell.
What is the current state of play
when it comes to M&A in the
affiliate space? the activity, looking to cash in on their
many years of hard work.
The recent upward trend in M&A activity
has mainly focused on the larger affiliate
groups attracting investment for the purpose
of stimulating growth through non-organic
means. There are several reasons for this but
our top three are as follows:
First, the profitability of affiliates using
link-building and content-based SEO is
usually high, with many small affiliates
achieving margins of between 60% and
90%, this compares with operators whose
EBITDA margins range from 10% to On average how much business
structure or advice does an
advisor provide to affiliates
looking to exit?
When we are engaged by affiliates, it is
usually after they’ve been approached by
one or more interested parties. Evaluating
and selling your business can be a
daunting process, although many affiliates
are enticed by the allure of a quick process
and (potentially) large amounts of money
in the bank. They jump in head first
“Operators such as Cherry and GIG are recognising the
importance of having their own traffic source – this is
symptomatic of larger affiliates charging such high rates
for traffic”
30%. Thus the interest in this category of
affiliates, specifically if they can be easily
integrated into the acquirer’s business and
their platform.
Second, operators such as Cherry and
GIG are recognising the importance of
having their own traffic source – this is
symptomatic of larger affiliates charging
such high rates for traffic, effectively
extracting all the value from the player and
leaving very small margins for operators.
Finally, affiliates themselves are fuelling
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iGB Affiliate Issue 62 APR/MAY 2017
without properly assessing the business,
leaving themselves open to a problematic
due diligence process.
Affiliates are multi-taskers who are
primarily digital marketers, but also web
developers, graphic designers, managers
and accountants… many of the acquirers
we deal with have specialist M&A teams
who will place all aspects of the business
under a microscope in order to identify
possible risks, many of which the affiliate is
likely to have missed.
Our job is to identify all the underlying
mechanicals that power a business as
well as the possible risks/pitfalls before
entering the process. The aim here is
to either ‘rightsize’, or at least have an
explanation as to why and how the
business is addressing the issue. Our
analysis covers financials, traffic, IT &
infrastructure, geographic and market
breakdown. This analysis also reveals
the unique selling points of the business
and helps us determine which acquirer is
likely to be most interested, based on our
extensive network and understanding of
their businesses.
While potential buyers carry out due
diligence (DD) to identify risks, they are
also doing so to drive the value of the
affiliate business down, so it’s vital that a
proper analysis is applied before handing
over financials and traffic data to the
inquiring party.
What are the key issues/sticking
points you encounter during
the whole process, whether
valuation, DD or key performance
indicators?
I’ll break this question up into two parts:
pre- and post buyer engagement.
Pre-buyer engagement is the analysis
phase where most of the issues will surface
and are ironed out. The majority of these
stem from financials (revenue and costs)
which will determine the earnings before