INSIGHT
APPETITE FOR CONSOLIDATION
Going by the evidence of recent fundraising efforts , the hunger for further deals on the part of investors is showing no signs of abating , writes Scott Longley
IN JANUARY , XLMedia announced an “ oversubscribed ” share offering that raised £ 31.7m . This , it said , would be used to help the company capitalise on acquisition opportunities it had identified in “ key verticals ”, including gambling .
The offering came two days after the business announced its most recent deal :
the € 15m all-cash buyout ( including € 7m up front and the rest through an accelerated six-month earn-out ) of Finnish-facing online casino affiliate network Good Game ( See Table 1 ).
Meanwhile , the gambling affiliate market consolidator-in-chief , Catena Media , shows no sign of losing its hunger for more deals . In mid-February , it announced the successful placement of € 150m in new senior unsecured bonds , refinancing its existing € 100m bond loan and increasing the framework amount to € 250m , allowing it to further flex its mergers and acquisition ( M & A ) muscles .
That was certainly the message from the analyst meeting following Catena ’ s year-end results announcement in early February , when then acting chief executive
Henrik Persson Ekdahl said the company ’ s three-strong M & A team was “ scouting the globe ”, while also signalling a “ very interesting pipeline ” of potential deals .
Noting that the company had “ only ” done 28 deals since 2014 , he added that the team were looking at between five and 10 companies every week , and that
“ There will be start-ups setting out now to target only black or dark grey markets ” Charles Gillespie , Gambling . com Group
it was being “ quite selective ” about which opportunities it plumped for . “ An acquisition needs to add clear value to what we have ,” he said . “ This isn ’ t just multiple arbitrage . We are buying products , systems and assets that we really like and which we believe will grow long term .”
Price escalation Ekdahl was keen to emphasise that he didn ’ t believe buyout multiples were on the rise despite the current consolidation fervour , pointing to multiples for the deals Catena has completed of between two and six times EBITDA . “ We don ’ t see a change in dynamics for price or how we structure ,” he added .
Charles Gillespie , chief executive at Gambling . com Group , which itself raised a total of € 16m via the issuance of two convertible bonds last year , agrees that while there is some multiple inflation , it is not significant .
“ All the deals we have done have been in a similar range and the multiples have not really changed ,” he says . “ We ’ ve plotted the multiples on a graph over time for all the affiliate deals and the trend line has a positive slope , but only just barely . The bottom line is they are not really changing . The sellers , however , are a bit more sophisticated and arrive knowing what they want .”
Still , the quantum of buyout prices is certainly picking up . Although not all the sums for all the deals we have seen in recent months are available , the ones that have been disclosed would have been viewed as eye-popping just a couple of years ago .
Catena Media ’ s Baybets deal is a good example . The headline buyout price for the German-facing sports and financials business was € 26.5m , half to be paid in shares , with an earn-out of up to € 63.5m . With forward-looking revenues of € 9m on a 70 % profit margin , it means the multiple of 4.2 times sits within the two to six range that Ekdahl suggested were the company ’ s parameters .
The earn-out is very much a maximum figure . But what Catena considers a “ reasonable ” scenario has risen to € 39m
48 iGB Affiliate Issue 68 APR / MAY 2018