Better Collective increases M&A capacity
Leading affiliate Better Collective has recently announced its plan to issue shares equivalent to approximately 10 percent of its total capital. This strategic move is aimed at preparing the company for future mergers and acquisitions (M&A). The company intends to issue the new share capital through an accelerated book-building process, a method that allows shares to be made available for a short period with minimal marketing.
A further look at Better Collective’s M&A strategy
The recent capital raise by Better Collective is a strategic move aimed at increasing its M&A capacity and preparing for future acquisitions. The company successfully raised DKK1,082 million (c. EUR145 million) through a share issue, which will be used to reduce its current debt facilities. This move is expected to bring down the net debt from EUR282 million to around EUR137 million, aligning with the 2024 EBITDA target range of EUR125 million- EUR135 million.
Better Collective’s target for net debt / EBITDA to be below 3x in 2024 implies an M&A capacity of around EUR250 million following the capital raise. This strategy is particularly relevant given the highly fragmented digital sports media market, which presents numerous attractive M&A opportunities.
While analysts do not anticipate any significant changes to its estimates or valuation range following the capital raise, the strengthened balance sheet suggests that the growth target set for 2027 (revenue CAGR of +20 percent from 2023-27) could be more readily achieved, and potentially even surpassed, due to the increased potential for M&A-driven growth. This analytical perspective underscores the strategic importance of Better Collective’s capital raise and its implications for the company’s future growth trajectory.
Aiming for financial flexibility
The primary goal of this share issuance is to enhance Better Collective’s financial flexibility. The net proceeds from the offering will be utilized to pay down the company’s existing debt obligations. This move will empower the company to navigate through a highly segmented market brimming with a plethora of enticing opportunities for acquisition, thereby adding an intriguing dimension to its operational strategy.
Since 2017, Better Collective has made a total of 34 acquisitions. The most recent transaction was the purchase of Canadian affiliate Playmaker Capital for €176 million, which was completed in early February. The share issuance, which is not underwritten, targets institutional and professional investors in Denmark, Sweden, and certain other jurisdictions.
The company has not yet determined an offer price, which will be disclosed following the conclusion of the accelerated book-building process. The final pricing and the number of new shares are expected to be announced as soon as practically possible thereafter. The new shares are anticipated to settle around March 4.
As part of the offering, Danish fund BLS Capital Fondsmæglerselskab has committed to subscribing to 50 percent of the offering as an anchor investor. In light of the capital raise, Better Collective and its executives have agreed not to sell any shares until the release of the company’s Q1 financial report.
Better Collective dominated affiliate M&A activity in 2023, being responsible for six of the ten affiliate acquisitions that occurred during the year. The company was also responsible for the year’s three largest purchases: the €176 million Playmaker Capital deal, the €56 million acquisition of Skycon, and the €49.5 million Playmaker HQ agreement.
The decision to highlight M&A in the capital raise indicates Better Collective’s intention to continue this trend into 2024, further solidifying its position in the dynamic affiliate space of the gambling industry.
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