The total transaction consists of an upfront payment of SEK 2.1bn in cash and SEK 0.6bn in newly issued b-shares. There is also an earn-out component over the coming 8-years, which can amount to SEK 1bn in cash and SEK 1bn in newly issued b-shares. As such, the total transaction amounts to SEK 4.7bn (66% cash). Embracer estimates that the acquisitions can add SEK 2-3bn in sales and SEK 350-550m in adj. EBIT during the next FY (ending March 2023). Thus, the total transaction multiples amount to 2.3-1.5x EV/sales and 13.4x-8.5x EV/adj. EBIT. When accounting for the dilution of all possible earn-out shares, we could see FactSet consensus adding 5-8% to the current 22/23e adj. EPS estimates.
Large M&A headroom remains even after today
Before today we estimated Embracer’s M&A headroom to SEK +30bn (cash+shares) and given the size of the acquisitions today a very healthy M&A headroom remains. Management reiterates that there are ongoing discussions with large targets that could add a new segment to the group and we would not be surprised to see more M&A during H2’21.
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