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iGaming companies in particular discover that “little” quirks (an un-cancelled white-label contract, or an outdated RNG certificate) can mutate into price-eroding risk once they show up in a Quality of Earnings (QoE) report.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.
