Working with multiples iGaming businesses in their M&A strategy, The Gambling Cockpit have understood that valuating a business or assets is sometimes a bit tricky.
When it is about valuation, there are multiple approaches to take into account; and even though it’s all about maths in first place, it’s important to keep in mind:
The real value of an asset, a company or anything is the price someone is ready to pay for it.
Facing iGaming entrepreneurs incomprehensions
iGaming is still a young industry, with companies that have started in some cases, in the founder’s room years ago, by people that have no corporates track record; meaning processes might not be something they’re used to. (That’s part of what makes iGaming so interesting, though)
M&A is a long road, to find potential buyer, running the due dilligence, negotiating and then, signing the SPA/contract. The full process of the sale can take up to years, depending the size of the deal. Because this is not just paying for assets/ a company. Buyers are also anticipating the Post Merger phase, which is, from our experience more difficult than the buying process itself.
Assets have metrics before having a price.
When we reach out to potential sellers, few of them are asking what’s our price for their assets. That’s pretty uncommon in merger and acquisition to process like this; even more for non-listed businesses.
If you were trying to acquire a listed company, it would be easier: because key metrics such as profitability, turn-over, geo split and revenue sources, and stock exchanges also share market valuation. So, the buyer would rely on that firstly to make an offer.
But, when it’s about a unlisted company or some specific assets such as a business line or a website, it’s important to remind :
- If a broker or a M&A firm is reaching out to you, they have interest on what’s in your possession because the first metrics we have look promising.
- They may have a sufficient budget. Hiring advisors is represents an investment.
Showing a will to help valuating your business by sending the accurate data will make the process smoother for both parties. Asking for a NDA can sometimes be reassuring for un-used stakeholders.
Different ways to valuate your business
Comparable company analysis (CCA)
This method is based on the comparison of the target company to the listed ones. This valuation process is more relevant when there are a multiple listed businesses.
Analysts and M&A advisors are then using metrics such as Price/earning ratio or enterprise value to ebitda multiples.
Precedent transactions analysis
Based on the lattest M&A transactions on the market, analysts can share a valuation range of similar companies.
Discounted Cash-flow (DCF)
This valuation method is the most used and is built on what analysts estimate the target company capable of achieving in terms of cashflow. They then, discount the free cash flows they anticipate, to their present value, using a rate (WACC / Weighted Average Cost of Capital). This is usually seen as the most accurate method.
In all ways, valuating a business is doing maths on projects that sometime represent a lifetime dedication, effort and work.
At The Gambling Cockpit, we really understand that selling your business is building your legacy and getting a reward, that should match your expectations and buyers ambitions. Our M&A Advisory services are fully based on getting the most for both parts, because in our point of view they share a common interest: making the transaction.
TGC is running multiple M&A projects for Operators, Suppliers and Affiliates of the iGaming industry. Our deep understanding of the industry combined with our network and diversified background allow us to provide a tailored support.
Reach us directly through the following links to discuss how we can help.
Pierric Blanchet
Founder @ TGC
FAQ
There a multiple ways to build a valuation for your business. It can start by what you would like to get, but will need to be backed with metrics, calculations and arguments, including untangible assets
As a M&A consulting firm, we’re providing the full support your ambition requires. From the valuation, to identify relevant parties, running the negotiations and even managing the post merger integration.
The Discounted Cash Flow is the most accurate and the most used in M&A all around the globe. But, comparative analysis, past transactions analysis, are also used.