Valuecruncher was at the MORGO 2006 conference in Taupo in July. Sam Morgan gave a great presentation on the sale of TradeMe to Fairfax – including some financial numbers. Sam gave Valuecruncher the OK to complete a valuation and circulate it. A copy is attached to this post.
With the numbers that Sam provided – I took a conservative approach with the valuation. Sam disclosed that TradeMe is still growing revenues at 10% a month! Even with my conservative assumptions I still got pretty close to the ultimate transaction value (mid-point of Valuecruncher valuation NZ$650 million compared to transaction at NZ$700 million).
There have been a number of media reports describing Sam Morgan as “lucky” for getting the deal done. Here at Valuecruncher we wonder if he did not sell out too cheaply. We believe that Sam deserves more credit than he has received for creating an extremely fast growing company that was also extremely profitable.
Sam also disclosed that TradeMe has approximately NZ$1 million of NTA – and then joked that 700x NTA is the new Fairfax standard for valuing acquisitions. See previous comments on NTA – understanding the cash flows is key to understanding valuation.