Scout24 activities: cars and real estate
Scout24 is best known for ImmobilienScout24, the leading real estate website in Germany, as well as for AutoScout24, also a marketplace but for cars.
Scout24 company valuation: from €2 billion to €5 billion in 5 years
In 2013, Hellman & Friedman acquired 70% of Scout24 in a deal which valued Scout24 at €2 billion. Only five years later, Scout24 declined a €4.7 billion purchase offer from private equity firms Hellman & Friedman (again) and Blackstone. Naturally, this brings a natural question: how can Scout24 be worth so much more only five years later?
How can Scout24 be worth so much more only 5 years later?
Is it because of an increase in revenues for Scout24?
In 2013, Scout24 reported €340 million in revenues. Comparatively, in the first nine months of 2018, revenues amounted to €385.8 million. This indicates that Scout24’s yearly revenues should surpass the €500 million milestone in 2018, which is a 50% increase since 2013.
However, market cap has more than doubled (€2b to €5b). So, do revenues alone justify the increase in market cap of Scout24 ? No. Let’s investigate further.
Is it because of an increase in profitability for Scout24?
Indeed, the EBITDA margin of Scout24 has drastically increased over the past 5 years. From 29.7% in 2013, to 52.7% in 2017 (see graph at the end of the article).
Is it because of an increased market potential value?
In 2018, Scout24 acquired FINANZCHECK.de, a German online loan comparison portal, for €285 million. And this wasn’t an isolated acquisition. Indeed, online marketplaces such as Scout24 are currently expanding across the value chain. Indeed, in addition to advertising, these online marketplaces are developing other services a home buyer might need. Loans? Insurances? Moving? Utilities? Valuation and data?
Is it because private equity firms have entered the game?
Silver Lake, a US private equity firm, acquired the British company Zoopla Property Group (ZPG) for €2.5 billion in 2018. ZPG made £244.5m in revenues in 2017, with an adjusted EBITDA at £96.4m. Comparing with Scout24, ZPG was making approximately half of Scout24 revenues, and less than half of Scout24 revenues. So we could imagine why shareholders of Scout24 may consider that any decent offer for Scout24 should be above €5 billion, considering the ZPG example at 10x revenues.
Last but not least: expanding across the value chain
One more interesting thing about ZPG (Zoopla Property Group) is that it has been among the first online marketplaces to diversify. Indeed, ZPG owns a suite of price comparison websites such as Money.co.uk which can be used to compare loans, mortgages, credit cards, but also uSwitch, which can be used to compare gas, power and broadband prices. What’s more, ZPG acquired Calcasa, a property market data company based in the Netherlands.
Quite likely, private equity firms are keen on acquiring property portals or online marketplaces that have diversified. Just as ZPG or Scout24 have done. Indeed that creates a very healthy business that does not entirely rely on its advertisers, but that is adding value to both users and advertisers with new services that come to enrich the marketplace.
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