THE NORDICS
interest, tax, depreciation and amortisation
(EBITDA). This is the most important
metric to establish as it will be used to
calculate the Enterprise Valuation (EV).
NDPs (new depositing players) or
FTDs (first time deposits) are an indicator
of player value - with the recent demise
and prior misinformation of StatsRemote
(until recently the most commonly used
program to monitor revenues and players),
there are many affiliates who are relatively
blind as to the real player numbers their
sites are generating.
Misaligned expectations can cause issues
further down the line if not picked up early,
so managing expectations, on both sides,
is important. Therefore it is necessary to
create a process that imparts fair market
value to the business, and often this
involves managing owner’s expectations
around reasonable EV bandings (and the
respective earn-out period), but importantly
ensure would-be buyers also recognise the
value of the assets to be acquired. Thus
we spend a significant amount of our time
managing expectations on both sides.
Turning to post-buyer engagement,
there are so many acquisitive buyers in the
market it is pragmatic to engage numerous
parties. This can create complexities and
is certainly time consuming, although it
is invariably countered by an increased
valuation through simple supply/demand
economic forces.
Managing and properly gating potential
buyers ensures a smooth and expeditious
process. Considering the buyer is
responsible for preparing the sales purchase
agreement (SPA), the final stages can be
unpredictable – having applied our own
due diligence on many likely acquirers,
we are well positioned to help guide the
affiliate in selecting the right buyer and not
necessarily the one with the most money
on offer.
If we’ve done our job properly, this
phase is usually smooth sailing but it’s
crucial that a proper structure is adhered
to, ensuring that we are in control, not
the acquirer.
In a nutshell: exit advice for business owners
This really depends on the category of seller (and buyer), but here are the most
important points in RB Capital ’s view:
• Provide all the required information to support the process. Especially with
businesses at a relatively early stage in their lifecycle, the importance of
providing all the necessary data upfront is sometimes dismissed by owner/
founders, which requires us to spend much more time on the ground with the
affiliate business to fully map out all the underlying entities
• Play the long game. This may sound like stating the obvious, but the
longer the founders/owners are prepared to help the right buyer transition
a successful sale, the better the incentives for them. We work extensively in
these kinds of scenarios, the intention is always to get the best possible value
and return on the assets.
• Set reasonable expectations as to the value of your business – if you come
into the process thinking you will get the “best case” valuation, you are likely
to be disappointed. As a broker we are incentivised to achieve the highest
possible price, however at the end of the day the value of your asset is what
someone is willing to pay for it.
What is the outlook for M&A in the
affiliate space?
M&A cycles tend to consolidate sectors
to a small number of large players and
a handful of medium-sized players.
This is certainly the case with travel and
financial price comparison industries.
However, considering the fragmentation
of the affiliate space, we believe it is likely
to take a slightly different path, where
large affiliate businesses are controlling
hundreds of small to medium-sized
brands. This is likely to be the case due to
the diversity in the industry in terms of
verticals i.e. casino, sports, bingo etc. and
myriad sub-categories within each, not to
mention the segmentation of player types
they attract.
Currently we have a sellers’ market,
however based on recent transactions we
are privy to, we believe that the true value
of affiliates is yet to be realised and with
the correct preparation and positioning
combined with the increased buy-side
demand we’ll see multiples increase over
the next 12 months.
BEN ROBINSON, is co-
founder of specialist M&A
and funding brokerage
RB Capital, combining
best-in-breed expertise for
growth, investment and M&A
across gaming, fintech and media
verticals. Ben has more than 15
years’ commercial experience across
technology and media, of which
the last seven have been deeply
embedded in the online gambling
and blockchain sectors. Ben sits
on a number of advisory boards for
fintech and igaming companies across
Europe, Asia-Pacific and the US.
NAME: BEN ROBINSON
DATE: 7 APRIL 2017
WHEN: 14.45
iGB Affiliate Issue 62 APR/MAY 2017
43