INSIGHT
%
“Those buyers that
have been happy
to buy in markets
with little or no
regulation will
continue to do so in
the medium term”
Acquisitions in (non)-regulated markets
100
80
60
40
20
0
2015
Partially
2016
2017
Regulated
2018
Non-regulated
Source: RB Capital
therefore the likelihood of changes to
commission plans and/or rules (and,
by extension, the risks that will impact
this revenue soon) is high; would-be
buyers, therefore, steer clear.
Those buyers that have been happy
to buy in markets with little or no
regulation will continue to do so in the
medium term.
So where does this leave the affiliate
market? Have all the major deals been
done? Far from it, even judging by just
the most recent acquisitions. There is
still a healthy list of private affiliates
or affiliate networks that continue
to enjoy strong annual growth and
increased penetration in new markets;
both regulated and unregulated.
Publicly listed buyers are employing
a renewed level of creativity around
selection criteria in an ongoing drive
to increase share price. This means
that there will continue to be affiliate
transactions that will be multi-market,
cross-product and variable commission
plans. Conversely, private buyers and/
or those happier to work in non-
regulated markets continue to buy at
the same rate, with the same volume
of deal-flow but different sale criteria
(such as earnout multiples for example)
compared with regulated markets.
Affiliate acquisitions are expected
to continue at the same rate for the
next 18 to 24 months and well into
2020. While the level of capital for
public buyers remains liquid (good,
healthy cash flow on their profit-and-
loss statements) and under-invested
(more assets than liabilities on their
balance sheets), these players will
continue to support their growth in
market capitalisation with more M&A
transactions. Market perception of
these public players’ strategy will
continue to be based on their rate (and
type) of acquisitions and a sudden
change in buying behaviour may
signal the beginning of the end of the
affiliate-sale boom.
Two years from now, it is likely that
M&A decision-making will mainly
or even solely be determined by the
public players’ share price, as most of
shareholder capital will be vested.
Non-public and/or non-regulated
market buyers will continue to buy
at the same rate for the foreseeable
future because their buying decisions
are based less on external factors and
more about emerging opportunities.
As territories become more regulated,
these buyers will shift their acquisition
patterns to even newer markets (or
technologies, for example the recent
surge in app-store optimisation with
ASO-based M&A).
In summary, there is no one-size
template for gaming acquisitions
– especially so for affiliate assets.
Different buyers have significantly
different requirements and, while
they will enjoy the same momentum
for the foreseeable future, expect
to see changes in buying behaviour
around early 2020. In the meantime,
anyone planning to scale their affiliate
business for a future transaction
should look at the numbers to ensure
they present the right metrics to the
right buyer at the right time. What,
who, how and when is a sufficiently
critical discussion that it is best left for
another time.
JULIAN
BUHAGIAR
is co-founder of RB
Capital. An investor, CEO
& board director to multiple
ventures in gaming, fintech & media
markets, he has led investments,
M&As and exits to date totalling
more than of $340m.
iGB Affiliate Issue 71 OCT/NOV 2018
61