Ariadne Capital was the sole financial advisor to BeatThatQuote on its acquisition by Google in March 2011. We write the following Valuation Paper which anchored the valuation for a company with ~£250 K at £100 m which enabled the deal to get done at £37.7 m.
Ariadne Capital believes that an appropriate valuation for an acquisition of BTQ by Google would be in the range £100 – £110m. This paper sets out how this valuation has been derived.
Financial Projections for BTQ as a Stand Alone Business
The latest current financial year forecast together with five years of projections are tabulated below.
Actual monthly revenues are tracking extremely closely to the current year forecast and management are confident that the forecast will be achieved. Projections are based on very conservative assumptions.
Key metrics underlying these numbers are:
We have carried out a valuation analysis of BTQ as a standalone business looking across the normal valuation metrics of:
In summary this yields an average valuation range for a STAND ALONE business of £46 – £64m with a mid point of c£55m.
The analysis is contained in Appendix 1. However, this valuation does not include synergies, and also does not reflect the scarcity value – within the UK market, BTQ is the only privately held independent price comparator with a comprehensive product portfolio.
We have also not attempted to compare a build vs buy scenario because we are not privy to much of the information on your part that we would require to perform this analysis accurately.
However we would make the following points.
If Google decide to build rather than buy, the cost to Google will not just be the time and lost earnings that it will take Google to catch-up. Aside from the fact that BTQ brings Google considerably greater certainty in execution, in a build scenario Google will find that by the time it has developed its offering, a significant portion of the market will already be in the hands of other players, including BTQ. Google will therefore have already lost a large slice of the market that it would otherwise have owned if it had acquired BTQ and will have to settle for a lower market share than it otherwise would.
Also the standalone valuation significantly underplays the value of BTQ to Google because of the large synergy that BTQ will be able to unlock, as indeed would be the case for other likely acquirors whether they be other search players, financial product providers looking for additional distribution or other price comparison sites to whom BTQ could bring significant incremental revenues together with large technology cost savings.
We have not attempted to model the synergies available, but they are enormous. To give some idea of scale, the UK price comparison market alone is worth £500m, and the UK is generally estimated to be worth c5% of the global market opportunity which would therefore be valued at £10bn. BTQ management believe that if Google acquire BTQ, it would be realistic to project that a 20% market share could be achieved within 6 years which would be worth $2bn in revenues.
In summary, Ariadne Capital believes that an appropriate valuation for an acquisition of BTQ by Google would be in the range £100 – £110m, derived from a standalone value of £46 – £64m, together with a synergy value of c£50m, which represents a tiny fraction of the synergies that BTQ would allow Google to unlock.
4 June, 2010