Mavin Entertainment, one of the most successful music companies in Nigeria (and Africa), has seen continued growth and success of its current roster of artists. Rema is now a global phenomenon and Ayrra Star is considered to have the potential of replicating Rihanna’s music success.
In 2019 Mavin received funding from Kupanda Capital (KC) in what was a widely reported first of its kind equity investment into a Nigerian music company by foreign institutional investors. I wrote about the likely structure and cap table implications of the deal around the time, which you can see here.
In a nutshell, KC invested $5m at a post-money valuation of $9.5m giving it just over a 50% stake in Mavin Global Holdings Limited (MGHL), the UK parent company that owns majority shares in MG Entertainment Nigeria (MGEN).
As part of the deal, Don Jazzy (Mavin Founder/CEO) transferred his ownership of ‘Mavin Records IP’ (described further below) to MGHL in return for a 48% stake. Note that this IP was valued at $4.5m (MGHL’s pre-money valuation at the time of the deal). Don Jazzy also liquidated a portion of his MGHL shares for $1.1m.
More Funding, Higher Valuation
New information on MGHL became available in its 2022 annual company filings to Companies House, the UK company regulator. The filings reveal that:
KC/TPG have invested more funding in Mavin;
MGHL’s valuation has more than doubled; and
Mavin’s revenues are $3m+ per year.
More Funding, Higher Valuation
Not long after KC’s initial $5m investment, MGHL raised a further $2m, again led by KC (which invested another $1m) and with participation from Amalfi-MSA Investments LP (AMIL) and TX Evolution LLC (TXE) (likely a TPG/Evolution Media JV investment vehicle) each of which invested $500k. This seems to have been a bridge-round as the price per share for this additional investment is roughly the same (albeit, curiously, slightly lower) than the price per share at the time of KC/TPG’s original investment.
Just over 12 months after the additional investment, TPG invested a further $3.5m but this time at a much higher price per share that effectively saw MGHL’s valuation more than double. This signals that it was a likely a new funding round (as opposed to an extension of the prior round/bridge funding).
This investment was made at a valuation of just over $25m, representing a 2.6x multiple on KC’s invested capital over a 3-4yr period
Given a usual investment holding period of 5-7yrs for private equity firms, KC/TPG will likely continue to hold (and seek to add value to) their Mavin investment until at least 2027. Around that time, expect some news around Mavin being acquired (by a bigger private equity firm, or strategic investor such as one of the Big 3 labels or a well capitalised indie), or possibly listing shares on a stock exchange.
By such point, Mavin would have to reach a valuation of at least a $70-80m valuation in order for this to be seen as a successful investment for KC/TPG, as it would represent a 7-8x multiple on their initial investment.
Mavin Revenues
To achieve the above valuation targets, Mavin’s revenues would need to grow to around $10-11m over the next 2-3years, which is an almost 200% increase from current levels. Sounds like a big ask, but Rema is now in the billion streams club, and Ayrra Star is arguably not far behind. The remaining acts could also potentially come into their own, as all it takes is a few viral moments to change things for a music act these days. Easier said than done though.
The key driver behind music business valuations is the recurring annual revenues of the business (from its copyright royalties and other income such as live event revenues). Valuations are generally based on a multiple of these revenues, with said multiple determined by a range of factors including the growth and quality of such revenues, and the length of time such revenues have been generated.
As such, MGHL's valuation is almost certainly a function of a multiple on MGEN revenues in the past 12 months. Industry standard multiples for music businesses in advanced markets range from 15-20x on the last 12 months recurring (generally copyright-related) revenues of the business.
If one applies a much more conservative multiple of 6-9x (ie more than half that of advanced markets), based on MGHL's current valuation one can estimate that MGHL assets generated at least $3-3.5m in its prior 12 months. This is confirmed in its 2022 financial statement filing which shows that MGEN generated just over $3m.
It is worth noting that the Mavin Records IP, which consists of works and assets from Mavin's first/initial roster of artists (Tiwa Savage, D Prince, Dr Sid, Korede Bello etc), was assigned to MGHL with a $4.5m valuation. This means that these assets were (and likely still are) generating anything between $500-$600k+ in annual revenues.
Conclusion
To date, Mavin has raised $11m of external capital and has a current estimated valuation of around $25m. The company has a back catalogue of assets that likely generate over half a million dollars per year whilst its frontline catalogue is generating $1m+ of annual revenues, and it makes $2-2.5m of other income (eg live events etc).
With two star artists on its roster who are growing in global popularity, and a solid cash balance to invest in them and the rest of its artists, Mavin is well-positioned for continued success.
Add that music copyrights as an asset class have a positive outlook due to: increased subscription prices by DSPs; rulings in favour of higher royalty rates from the US Copyright royalty board; and the likely adoption of user-centric royalty sharing mechanism for streaming revenues. All point to growth in value for music copyright assets which is evidenced by the increasing amounts of funding and deal activity occurring directly in relation to music companies but also indirectly via music rights funds.
Mavin is already a successful company by any metrics, but the injection of external capital means being merely successful is not enough, “super-successful” is the benchmark. The important takeaway is that the next 2-3yrs are key, and Mavin (and especially its investors) will be seeking maximize the company’s revenues from its assets, grow its portfolio of high value IP, and scale its other sources of income.
Let’s see how things unfold.
Immaculate analysis on Mavin Records. Thanks for sharing this insight into a thriving Music Label