Buyer : SPH
Seller : 3 main founders, 2 smaller co-founders, 40% investor JDB.
Terms : $60M cap.
My guess?
1) 2 year earnout ala Hardwarezone and shareinvestor. But with JDB a savvy player, most likely the earnout is a proportionate one rather than a cliff.
2) 60%, 25%, 15% payout.
Analysis?
Deal makes a lot of sense for SPH. It costs a lot to set up and market a new portal and there is no guarantee they will win. See their efforts over the last 10 years on property, jobs and cars. So this way, at least the executives at SPH are sure to win for the next 3 years in the car space.
Deal makes sense for founders. A valuation of 11 times sales or 25 times PE is very good and fair. Also, the shareholding does not fully incentivize the working founders as JDB took a big chunk in the early days for a low investment of $800K.
Pitfall? Can SPH integrate and run sgcarmart well together with the all-important founding team? That is the multi-million dollar question. We will wait and see.
Payout?
Based on shareholding, gig winner JDB gets 24M pax, each key founder about 9.5M max. The 2 smaller ones less. This assumes max payout of course. Good deal all round.
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update after getting hold of their P&L for FY 2012 and combining with SPH reports.
As expected, the deal was a fair one both ways. I was wrong on payout ratios though.
1) SPH paid 53M already. (see their latest annual report).
2) SGCM profit is 3M net on revenue about 8M give or take. So the 60M valuation is about 20 times historical PE, SPH did not overpay.
Still great deal all round but the valuation is far more reasonable and not a crazy one. So looks like the Hungrygowhere guys still the best deal in terms of valuation multiple.
Thoughts on startup scene in South East Asia. While effort is made to be accurate in terms of numbers, i may sometimes get the data wrong. My purpose is to share what i know and what i have learned over the past 23 years. Feel free to leave comments or to email me. And if you are keen to learn more about Angel Investing pls visit https://www.angelcentral.co/investors/membership
Truly loved all these analysis so much!
ReplyDeleteThanks jason. I hope lifting the fog on deals will help fellow entrepreneurs with their startups.
ReplyDeleteVery straight shooting article. Thanks for the analysis Der Shing.
ReplyDeleteAsian investors typically are willing to pay only 5-10x PE especially for private companies. Am surprised that SPH was willing to pay 20x PE, looks like quite a generous offer and well done to the founders of SGCM! I wonder what SPH saw in the business that convinced it was worth paying 20x PE for?
ReplyDelete-CK-
Actually 15-25 PE is normal for Internet companies that are profitable and top few players. It is somewhat more rare for a non listed 1 market player but in this case they are super profitable in terms of margins and are not just top few player but #1. In addition, JDB owns 40% and for those guys, this is not a lot of money, so the offer has to be good for them to sell. Hence the 53m up front. You can't quite use normal private firm P/E ratio to compare.
ReplyDeleteInteresting thing is that sph timing is real bad. Right after buying, govt kick in with all the loan restrictions which will probably mean sgcarmart will not do as well this year. As usual buying high... But maybe long term will work out.