YouGotaGift's acquisiton: Numbers
The numbers behind YouGotaGift's $31 million exit
Good afternoon,
Welcome to this week’s Termsheet.
About two weeks ago, YouGotaGift, a twelve-year-old Dubai-headquartered digital gift card platform, announced its acquisition by its Japanese counterpart Giftee.
In today’s issue of Termsheet, I am sharing the breakdown of this transaction and some other details about it.
But before that, let me quickly explain what YouGotaGift does.
In very simple words, it sells digital gift cards to consumers and businesses. The gift cards are essentially vouchers pre-loaded with an amount of money that can be used to purchase goods or services at ~300 partner merchants of YouGotaGift.
Some of the notable merchant partners include Majid Al Futtaim, Shein, Amazon, Talabat, and Noon.
From what I understand, they have two types of cards, a multi-brand card that can be used at any of YouGotaGift’s partners or a dedicated partner-specific card (Amazon UAE card, for example).
If we zoom in, consumers buy these cards and send them as gifts to friends and family with personalized greetings over email or SMS. They can personalize them with animations (if you’re old enough to remember 123greetings), photos, and stickers.
This can be done through YouGotaGift’s website, or app.
That’s the B2C business but they apparently make most of their money from the B2B business.
There are two main use cases of the business offering.
First, large consumer-facing businesses, such as telcos and banks, use YouGotaGift's platform to offer digital gift cards as rewards for their loyalty programs. UAE’s leading telecom company e& is one of their clients.
Second. Employers use the platform to provide digital gifts to employees for occasions like birthdays, work anniversaries, or performance-based recognition.
YouGotaGift has 900 businesses using its offerings.
It was founded in 2012 by Husain Makiya and Abed Bibi, as HoneyBee Tech Ventures venture.
Giftee, the company that acquired YouGotaGift, offers similar services in Japan and Southeast Asia. Founded in 2010, it went public on the Tokyo Stock Exchange in 2019.
With this acqusition, the Japanese company is entering the Middle East.
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Now, the numbers.
Giftee has acquired a 91 percent stake in YouGotaGift for $28.1 million, valuing the company at $30.9 million.
The deal represents about 10 percent of Giftee’s market cap ($270 million as of Tuesday, November 26).
YouGotaGift is expected to grow about 37 percent year-over-year to hit a volume of $220 million in 2024.
In 2023, the volume grew 10 percent year-over-year to about $161 million.
The majority of it, $115 million (71.7 percent), came from the UAE, followed by Saudi Arabia at $43 million (26.6 percent), and the rest from other markets.
The company is forecasting $13 million in revenue for 2024, representing a 30 percent year-over-year growth. In 2023, it made $10 million, marking a 23 percent increase from the previous year.
EBITDA is expected to double in 2024 to $4 million. In 2023, it grew just 11 percent to $2 million. The EBITDA margin has increased from 22.5 percent in 2022 to 31 percent in 2024 (forecast).
This means Giftee paid about 7.7x EBITDA for the acquisition. As of November 26, 2024, Giftee is trading at 24x its projected 2024 annualized EBITDA (based on the first nine months).
Giftee's annualized revenue for 2024 should be around $60 million, which is 5.5 times the expected revenue of YouGotaGift.
The Japanese firm used a loan to fund the acquisition.
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The Middle East Venture Partners was the largest shareholder in YouGotaGift with a 44 percent stake. Based on the numbers discussed above, they should have received about $13.6 million from the exit.
MEVP first invested in the company in 2015 through its second fund, which announced a $5 million investment across four companies in April of that year. The exact amount invested in YouGotaGift at the time or in follow-on funding remains unknown.
But in a recent statement, the firm said that they made a 5x cash-on-cash return on the sale of YouGotaGift.
They also said that this exit takes their DPI (Distributions to Paid-In Capital) for the second fund to 118 percent. Fresh was the first exit from it. The proceeds from Fresha’s exit based on these numbers should be around $24 million for the second fund.
The firm still holds a substantial stake in Fresha despite multiple partial exits.
HoneyBee Tech Ventures (HBT Ventures) was another major shareholder in the digital gift card platform. The venture builder, focused on consumer internet plays in the Middle East, was founded by the team behind Zawya: Ihsan Jawad, Zaid Jawad, and Husain Makiya. Abdulrahman Tarabzouni, the founder and CEO of STV, was also a partner. Some other notable ventures by HBT included Roundmenu (acquired by Careem) and the jobs website Laimoon.
Kuwait’s Faith Capital was also a shareholder in YouGotaGift. It acquired a stake in 2020 through secondaries.
Hussain Makiya, the founder and CEO of the company, is retaining a 9% stake in the firm. Giftee is also creating an ESOP pool to incentivize other executives and employees to remain with the company.
It plans to acquire 100 percent of YouGotaGift by March 2028.
The Dubai-based platform also raised $3 million, perhaps in 2022, in revenue-based financing from Tenami Capital. It was the newly established firm’s first investment. Earlier this year, they announced that they’ve ‘successfully exited’ YouGotaGift with a ‘20 percent net IRR’ for their investors within two years.
This could potentially also serve as a good case study for revenue-based financing, in the region.
That’s it for today.
See you soon,
Zubair