Mergers & Aquisitions

Achievers’ Valuation Promising for Rewards and Recognition Firms


The report that Blackhawk Network paid $110 million cash for Achievers was good news for the private equity companies moving into the rewards & recognition industry (and the broader engagement space), as well as for the owners of such companies, since that valuation appears to be well beyond the standard 5-times EBITDA of most businesses, which to me is the only viable comparison given the nature of this marketplace today.

Before I comment further, full disclosure: Because operating incomes of incentive and recognition companies often are distorted by the outsize revenue contributed by rewards (which have traditionally low margins), there’s a tendency to exaggerate estimates of what the actual net income statement might look like by looking at revenue numbers. I haven’t looked under the covers, but I would expect this is a valuation many, many times any standard EBITDA model.

What does this mean? First, I owe the folks at Sequoia Capital a small apology, because while I believe I correctly predicted this investment wouldn’t scale in the way they had hoped, this valuation I would consider to be a very successful exit strategy. This is no fire sale by any objective measure. Second, the willingness of Blackhawk to pay this valuation in cash to add to its engagement service offerings signals a belief that this is a business with significant growth, and that there are profits to be made not only in the rewards business but potentially even more so in helping organizations achieve key performance goals through engagement.

In other words, engagement as a business in its current form may not be able to scale on the order of Google, Facebook, Ebay, etc., but it can still make a lot of people quite wealthy and provide many benefits to the organizations that use qualified engagement service providers of any type.

Note: We will be publishing an interview with Blackhawk Network President Talbott Roche shortly after the holiday.


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