UPDATE 15 February: Scout24 accepts improved $5.5 billion (€4.9 billion) takeover offer from Hellman & Friedman and Blackstone. Including net debt, total enterprise value is $6.4 billion (€5.7 billion). The implied 2019 EBITDA multiple is 17x.
UPDATE 18 January: Scout24 rejects $5.3 billion (€4.7 billion) takeover offer from private equity
Last week the FT reported that German online classifieds company Scout24 explores a €5 billion sale. The sale is likely to be announced sooner rather than later. To understand the rationale for the deal, let’s take a closer look at European online classifieds.
Scout24 was previously owned by Germany’s Deutsche Telekom. In 2013 Hellman & Friedman paid €1.5 billion for a controlling stake valuing Scout25 at €2 billion. In 2015 it IPO-ed the business for €3.2 billion. Scout24 is currently valued €4.2 billion. Hellman & Friedman finally exited its remaining stake earlier this year, according to the FT.
Scout24 has leading positions in selected European markets in Real Estate, Cars, and Finance.
Online classified businesses have long been a market favourite for private equity investors. The listing fees paid by advertisers (real estate agents, car dealers, individual sellers) are often highly predicable and profitable for market leaders. The industry is also known for high barriers to entry due to the network effects.
An IAB report estimates European classifieds spending at around $8 billion per year and growing around 5% per year.
Scout24 is projected to grow around 10% per year, so significantly ahead of the market, boosted by small acquisitions and its finance marketplace.
The company is valued at around 15x EBITDA which is in line with other classifieds players like Rightmove. Its EBITDA margins are about 54%, also in line with benchmarks.
Why the take-private?
The next ten years in online classifieds are likely to be different than the past ten, with big opportunities ahead, and the sense of urgency needed to act on them. Scout24’s own investor relations presentation even hints at that. New models create opportunities to take greater ownership of the transaction and provide more value, as our recent deep-dive report on marketplaces has shown. Also opportunity to expand the addressable market.
One perfect example of a new model, creating more convenience, is Auto1 Group, which buys cars directly from sellers, using its own balance sheet. A more recent example is Cazoo.co.uk, a new British startup launched by Zoopla’s founder Alex Chesterman, which will deliver cars to the consumer’s doorstep.
It’s also possible that Scout24’s management believes some of its own existing assets, such as the finance marketplace, are undervalued by public markets.
Check our recent deep-dive report to learn more about the future of online marketplaces.