M&A Due Diligence Preparation
M&A Due Diligence – Why Preparation Matters
In iGaming, every buyer’s lawyer, auditor and regulator will ultimately pull back the curtain on your studio, sportsbook, or B2B platform. A polished data room and a tidy operational story do more than impress – they protect value and compress timelines in a market where licenses renew annually and player habits shift daily. Preparing for diligence is therefore less about hoop-jumping and more about orchestrating a seamless exit at the price you deserve.
Purpose of Early Preparation
Getting ready months—sometimes a full fiscal year—before launching a process allows you to surface and solve issues on your own timetable, not the buyer’s. Middle-market iGaming companies in particular discover that “little” quirks (an un-cancelled white-label contract, or an outdated RNG certificate) can mutate into price-eroding risk once they show up in a Quality of Earnings (QoE) report. Addressing them early keeps leverage on your side.
Core Benefits – Explained
| Due-diligence track | Typical red flags in iGaming | Pre-sale actions that neutralise risk |
|---|---|---|
| Financial | Mis-categorised player bonusing costs; revenue recognised net vs. gross inconsistently | Commission a QoE light review; align revenue recognition with IFRS 15; reconcile bonusing lines to PSP statements |
| Legal & Regulatory | Expiring Malta/Isle of Man licences; GDPR gaps; unresolved player disputes | Map licence renewals; audit GDPR compliance; settle or escrow dispute liabilities |
| Operational & Tech | Legacy code without test coverage; single-person knowledge silos; unstable CRMs | Run third-party code scan; document SOPs; harden disaster-recovery and uptime metrics |
| Commercial | Key affiliate contract terminable on change-of-control; traffic concentration >40 % in one country | Re-negotiate evergreen clauses; diversify acquisition channels; document country P&Ls |
The table above is deliberately focused on issues that most often derail or discount iGaming transactions. Tackling them in advance yields four tangible advantages:
-
Credibility at first glance. Clean files and reconciled data lift buyer confidence and reduce confirmatory questions.
-
Faster diligence clock. An organised data room can cut diligence from 90 days to closer to 45, locking in price before market sentiment shifts.
-
Stronger negotiating hand. When you disclose known blemishes with a fix-plan already executed, buyers cannot use them as a price-chip.
-
Higher valuation ceiling. Proven compliance and stable tech stacks justify upper-quartile EBITDA multiples in regulated gaming.
Pros and Cons of Deep Pre-Sale Diligence
Pros
-
Value defence: Sellers who self-audit typically lose <1 % of agreed enterprise value post-LOI, versus 5–8 % when surprises pop up.
-
Deal certainty: Fewer walk-aways; buyer diligence teams convert into integration teams faster.
-
Time savings: Internal teams avoid “fire-drill” document hunts during exclusivity, keeping day-to-day operations on track.
Cons
-
Up-front cost: QoE reviews, licence audits and code scans require cash before any sale is guaranteed.
-
Resource diversion: Key finance and tech staff spend time documenting processes instead of shipping new features.
-
Potential discovery: A self-audit might uncover legacy liabilities you must solve—sometimes expensively—before going to market.
Frequently Asked Questions
Q 1: How far ahead of a sale should we start preparing?
Ideally a full audit cycle—nine to twelve months. That allows time to remediate findings and showcase a clean year-end set of numbers.
Q 2: We’re purely B2B—do we still need to audit player protection controls?
Yes. B2B licence holders must demonstrate oversight of their B2C partners’ responsible-gaming frameworks to retain supply licences.
Q 3: Does an earn-out reduce the need for spotless historical numbers?
No. Earn-outs hinge on future performance but are negotiated from a baseline enterprise value. Weak historicals compress that baseline.
Q 4: Can a seller-prepared QoE replace the buyer’s diligence?
It rarely replaces, but it shapes the narrative. A credible, third-party QoE shifts buyer focus from “find the skeletons” to “validate the upside.”
Q 5: What documents create the biggest bottlenecks if missing?
Up-to-date licence certificates, PSP reconciliation reports, and board-signed AML policies are the top three culprits.
Final Word
In iGaming M&A, value slips fastest in the shadows between operational reality and documented proof. Treat diligence preparation as your chance to light every corner of the business—before someone else brings a harsher spotlight. The result is a smoother process, a shorter timetable, and a sale price that truly reflects the years you invested.
