Inside Mavin's $175 Million Sale: Exploring the Intricacies of Acquiring a Record Label (pt.2)

Catch up from pt.1 here

Following Mavin’s call for investment or sale, when a potential investor or buyer indicates interest, there will be a series of information exchanges between both parties. They will engage in discussions and exchange information to gain a better understanding of each other's objectives, financials, operations, future plans, etc. This may involve sharing financial statements, valuation reports, market data, and other relevant documents.

While this seems like a breeze in words, the actual process in itself can be cumbersome, for many reasons. This exercise will first require a comprehensive understanding of the music business ecosystem and the dynamics that shape the market. For an African record label, I believe the intricacy compounds as Mavin’s early years of operation are bereft of a proper sales/consumption tracking system for music.

In the context of record labels or music business, during conversations about investments or sales, here are some examinations that might ensue.

1. Revenue Streams & Financial Performance

This part involves analyzing the myriad of revenue streams driving the record label’s financial performance such as music sales, streaming, publishing, sync, merchandise, live performances, partnerships, etc. I’ll touch on each briefly using Mavin as a case study.

• Music Sales, Streaming: In August, Mavin announced its artists had achieved a remarkable milestone of 6 billion streams globally. Considering an average payout range between $0.003 to $0.005 per stream, Mavin would record an estimated $18 million to $30 million from streaming alone. This is the part where I imagine the fate of monster records like Dorobucci, Adaobi, Eminado that made huge impact at a time of low streaming adoption in Africa.

• Publishing: This hints at the songwriter and producer share of streaming royalties. A look at the credits of most songs under Mavin’s catalog shows they’re created between Mavin artists and the label’s in-house songwriters (Mbryo, Cupastonce, Milar) or producers (Babyfresh, Altims, AndreVibez) per time. This means Mavin has a sizable pie of publishing rights to its name through affiliations with these producers and songwriters. Also, bonus point if they control a slice of their artists’ publishing rights. 

• Sync: Mavin has explored quite a number of interesting opportunities in video games like FIFA 21 (Rema’s Beamer), sitcoms like Bob Hearts Abishola (Tiwa Savage’s All Over), Ayra Starr on Creed III, etc.

• Partnerships: Mavin has earned partnerships with many brands directly or through its affiliated artists. These partnerships span multiple sectors, including Finance (Access Bank, VBank), Beverage (Pepsi, Monster), Oil & Gas (Forte Oil), Hair (Mega Growth, Darling), Telecommunications (MTN, Glo), Hardware (HP, Oppo, Oraimo), Lifestyle (Nike) and so much more.

Afterward, there will be an overall examination of Mavin’s financial performance to ascertain the potential for future earnings before the investment or sale agreement is closed.

This deep dive will encompass an analysis of the label’s past, present, and potential revenue sources, operating expenses, profitability metrics, historical financial data, growth rates, and industry benchmarks. This exercise might involve gaining access to Mavin’s proprietary data.

2. Assets & Intellectual Property

The potential investor or buyer will then delve into the intrinsic value of Mavin’s catalog - from the past to present roster, including the masters and publishing side. They will also assess Mavin’s rights to intellectual property; considering ownership, copyright duration, royalty streams over a period, and potential for catalog expansion. All these will enable the investor or buyer know how worthwhile investing a certain amount in Mavin would be for them.

3. Roster and Human Resource

The potential investor and buyer will look into Mavin’s present roster, artist development process, contractual agreements, etc. Factors like artists’ reputation, market demand for its roster, growth potential, artistic diversity, and individual contractual obligations will also be looked into to determine the value of the label’s talent pool. 

Artist loyalty to the label can also be advantageous, and it's evident how Mavin has maintained an impressive track record of little to no exit-drama with its artists. Tiwa Savage, for instance, departed the label after 7 years to pursue a move to Universal, while Reekado Banks departed about 4 years after signing. Artists like Korede Bello and Di'Ja spent at least 6 years each with the label, and the remaining acts have continued their association with Mavin, the oldest being Ladipoe and Johnny Drille for 6 years each. Quite the record, per Nigerian music industry standard.

Also, the ability of Mavin to attract, develop, and retain top talents in its workforce will also be evaluated. Growth, retention, and attrition rates of employees hold great significance to some investors as human resources are crucial to the success of every company, seeing that Mavin’s management remains in control after the investment/sale, according to Billboard.

4. Brand Reputation and Market Positioning

Potential investors or buyers are likely to investigate intangible qualities like reputation of the Mavin brand. They will likely analyze every detail including Mavin’s history, market positioning, industry influence, public perception, etc. They will closely analyze Mavin’s brand affiliations, awards, critical acclaim, and many more. 

For instance, the fact that Don Jazzy has produced the most Next Rated winners at the Headies, a prestigious music award in Nigeria, is not a trivial talking point in such evaluation process. The strategic introduction of Ayra Starr, a female teenage pop star, at a time it was lacking in Africa would not go unexplored. 

Mavin’s market share, competitive edge, ability to evolve and adapt to industry trends will be examined, and this is particularly evident in Mavin’s ability to reinvent its roster and maintain relevance from 2012 till date.

5. External Factors & Industry Dynamics

Here, all involved parties will delve into different facets of the market to explore a range of factors, including market trends, macroeconomics, technological advancements, evolving consumer preferences, etc.

They will carefully examine both past and recent investment or merger & acquisition (M&A) transactions within the industry. This analysis will give them good insights into aspects such as reasonable valuation multiples to use for the deal.

It gets exciting in the next part - same time tomorrow! 🤗

Updated: Read pt.3 here

Updated: Read pt.4 here