Article by David Reid in Gambling | 01 December 2017
What Online Casino learned at SiGMA
How to sell your affiliate business or website – that was one of the most interesting sessions we attended at SiGMA 2017.
Affiliates are in the business of earning money every month from affiliate networks and operators. Growing traffic and directing these players to the casino operators will earn good money from CPAs, rev-share or hybrid model deals. For some affiliates, this is a great life as they can grow at whatever rate they want or just enjoy life as is.
At some point in time an affiliate might consider selling their business, or better still, they might get approached by a large affiliate network such as Catena Media with an offer to buy. There has been lots of mergers and acquisitions recently with cheques changing hands for millions of euros (or £’s for us in the UK).
I listened carefully to the panel at SiGMA as they spoke about the legal elements of M&A’s and noted numerous advice tips from the panel members from Gambling.com Group and XL Media Group as they spoke about what they look for in an acquisition.
Here are my top 10 tips for affiliates looking to eventually sell:
Secure the best rev-share deals that you can, don’t rely only on CPA deals. A buyer wants to know that they have a continual revenue pipeline after you sell your affiliate site. CPA deals mean they still have to win new players every day, so it is not as attractive to them
When you start consistently generating 100,000 euros per month – you start to become interesting, affiliate networks may want to speak to you at this point in time
It is better to generate 100,000 euros from one site each month, rather than generating 100,000 euros from 50 sites – why? Because the buyer will only have to integrate one website into their backend infrastructure which is easier and cheaper than having to take over 50 websites
Keep your overheads as small as possible. Try to operate your affiliate business with the minimum amount of people as possible. Again, when a network or operator comes along, they want to buy businesses which are highly profitable so they get a quicker return on investment. Having to deal with big teams of staff means your profits are not as good and they have to consider all these staff members i.e. what do they need to pay to make them redundant
The legal teams and accountants are looking at your EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). This is what they base their multipliers on when they are valuing your business. So make sure your financial accounts are up-to-date and clean
Only operate in white markets, some grey markets are acceptable, but do not operate in the black markets. Buyers are not interested in those affiliates in the black market. It is too messy for them and puts their reputation and licenses at risk
Another factor that buyers consider is “asset” or “share” purchases. Make the structure of your business as clean and simple as possible so that when they do come along to buy you, it is easier to buy the asset (which might be your main website) or the company (the shares) which holds all the IPR for you
Be prepared for long and difficult due diligence exercises. These legal firms know what they are looking for and want to make sure the deal is sound and on a legal standing before money is exchanged
Be honest and transparent with the due diligence team. If there are some things you are not proud of sharing with them, it is best to be open at the start of the conversation, as they will find out eventually. This could lose you millions of euros if they find out later and stop the deal or re-evaluate – reducing the offer by a sizable amount
Finally, only sell if you want too. Lots of affiliates have rejected offers of several millions of euros or sterling because they are making a good living every month from their sites.
There will be other interesting tips that other affiliates can share, especially those who have been through the process themselves.
As we get deeper inside the M&A sector, we will look for more tips for you and write follow-up articles. So please bookmark What Online Casino www.whatonlinecasino.com or send us an email at email@example.com to be added to our mailing list – it only takes 20 seconds.
Share Your Experience
If you are an affiliate, affiliate network or operator who has been involved in an acquisition, we would be interested in hearing from you so we can share your experience on What Online Casino.
If you want to know about tip no.11 - which ispossibly the best tip I can give at this moment in time. Email me at firstname.lastname@example.org and I will personally email you the answer.