You are advising Ace games a Private online gaming company.
The CEO is interested in answerting the following qu
1. Industry multiples:
As a gaming company, Ace Games is a consumer facing technology business. How do valuation multiples (EV/E
2. Peer multiples:
The closest peers identified by your team are: Activision Blizzard (ATVI), Electronic Arts (EA), Take-Two (TTWO)
3. Company valuation:
What is an appropriate EV/EBITDA multiple for Ace Games, and what is the implied enterprise value?
1.0 Industry
2.0 Peer
3.0 Company
ising Ace games a Private online gaming company. The CEO is interested in answerting the following questions
dustry multiples:
ming company, Ace Games is a consumer facing technology business. How do valuation multiples (EV/EBITDA and EV/Sales) for consume
eer multiples:
sest peers identified by your team are: Activision Blizzard (ATVI), Electronic Arts (EA), Take-Two (TTWO) and Roblox (RBLX). What are thei
ompany valuation:
an appropriate EV/EBITDA multiple for Ace Games, and what is the implied enterprise value?
The combined EV/EBITDA and EV/Sales multiples in the technology sectors (Internet
Software/Services and Packaged Software) are higher than those in Consumer Services and
Recreational Products. This reflects the technology sectors' higher growth prospects, profitability,
and positive investor sentiment as compared to consumer sectors. Ace Games is primarily a
technology business and those numbers take precedence over its consumer experience
counterpart. The growth prospects and overall investor multiples match that of a packaged service.
While both kinds of businesses are capital intensive, tech sector has exponential payoffs due to
new innovations, R&D and new models that consumer services doesn't allow as much. There is
greater flexibility for market disruption in tech so investments also follow. While consumer
businesses are stable, they're much slower as reflected in their sales and forward going revenue.
W.r.f. perception, maturity and risk, tech industry has stable cash flows and so lower perceived risk
as compared to consumer industry.
Take Two and Acitvision Blizzard multiples are closest in terms of growth and margins resp. to
multiples projected for Ace games. This might arise from similarity of gaming focus, revenue
streams, market capitalisation and geographical presence and genre. Company
EV/EBITDA is 13.6x approximately (Rev*Implied ev/fwd sales)/(Rev*margin given) and implied EV Activision Blizzard
approximately is 36360 (EV/fwd ebitda mutliple*ebitda).
Electronic Arts
Roblox
Take-Two
A and EV/Sales) for consumer sectors compare with those of the technology sectors, and why?
Roblox (RBLX). What are their current EV/EBITDA and EV/Sales multiples? Which of these are the closest comps to Ace Games, and why?
EV/Fwd Sales EV/Fwd EBITDA
6.8 x 17.1 x
4.6 x 14.0 x
6.2 x 48.8 x
3.3 x 16.1 x
s to Ace Games, and why?
