Movers+Shakers Sells for $50M to Stagwell
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss Stagwell’s acquisiton of Movers+Shakers, and my valuation estimate of 7-8x EBITDA.
Movers+Shakers Sells for $50M to Stagwell
Movers+Shakers just sold for $50M to Stagwell.
I estimate 7-8x EBITDA multiple. Here’s why…
BTW some great learnings here for other agency owners!
DEAL TERMS
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$15M upfront purchase price (70% in cash)
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30% of upfront price ($4.5M) paid via Stagwell stock
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2 earnouts against specific earnings targets, totaling $35M
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1st earnout through 2026 ($17.5M)
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2nd earnout through 2028 ($17.5M)
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For each earnout, Stagwell could pay up to 50% in common stack
M+S OVERVIEW
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Started 2016 by 2 founders
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One of fastest-growing social agencies, 250B campaign views to date
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Known as “TikTok whisperers”
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Client focus in CPG, beauty, retail, entertainment, fashion, toys, tech
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Prominent clients incl e.l.f., Netflix, Neutrogena
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In 2023 won 21 new clients, gained Agency of Record (AOR) status for Tinder, Elemis
WHY STAGWELL BOUGHT M+S
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Adds social media prowess to Stagwell’s Constellation network of agencies incl 72andSunny, Instrument, The Harris Poll
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4th Stagwell deal this year (In the Company of Huskies, Tinsel Experiential Design, Left Field Labs)
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2 founders stay on as leaders, will continue driving growth
WHY M+S SOLD
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Wanted to impact their client businesses at bigger scale
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Sought like-minded agencies as partner, who bring capabilities like media, experiential, data & analytics, global reach
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Wanted to meet client needs ASAP, could go faster via M&A vs organic building of new capabilities
What else I find interesting about deal…
I calc Stagwell enterprise value of $2.95B.That’s $1.28B mkt cap plus $1.5B LT debt plus $270M LT leases less $99M cash & equivalents.
With Stagwell’s 2023 adj EBITDA guidance of $390 – 410M, that equates to 7.2x – 7.6x forward adj EBITDA multiple.
To prevent the acquisition from being dilutive, Stagwell would want to pay a lower or similar multiple for M+S.
That being said, there’s high demand for social and influencer agencies in today’s deal market (I know because we’re advising another one on a sale). The reason is because the modern brand marketer wants a 1-stop shop for all its mktg needs…media, branded content, influencers, analytics, PR, etc.
And the agencies that can service those diverse needs under one roof will continue to grab majority of client budget.
Within social agencies, M+S was a prized asset → very high growth, premium clientele, growing LT recurring revenues via AOR deals.
Those dynamics drive a higher sales price, since translates to more value for a buyer post sale.
So, chance that Stagwell paid above 8x EBITDA. But I’d expect the earnout structure is setup so that blended EBITDA multiple in earnout success is below 7x range.
Also, a 5 yr earnout is long! I guess the founders must stay on for a min 3 yrs through first earnout period.
Overall, some great learnings here for other ad and social agency owners.
I’m the founder of RockWater. We do financial and strategy advisory for media, tech, commerce. From M&A and fundraising to consumer research and go-to-market planning. DM me if you want to chat.
