Vinyl Group’s (ASX: VNL) ongoing acquisitions appetite has added former Sydney startup Serenade to its stable in a conditional deal that represents a major haircut for investors in the NFT music marketplace.
Serenade founder and CEO Max Shand will become a Vinyl Group employee, in charge of meeting a range of sales targets in the hope that the startup’s shareholders will receive $1.5 million in Vinyl shares if the business if the merged business hits a revenue and earnings targets over the next year.
The all-scrip acquisition of London-based Serenade for $800,000 in shares at $0.09739 is subject to a 12-month escrow, with the deal going through today.
A further earn-out worth $1.5 million in shares for Serenade shareholders is contingent on the combined business achieving a minimum $4 million revenue and $500,000 in Earnings Before Interest and Taxes (EBIT) in 12 months. Shand has 5 million options, vesting in two equal tranches, and aligned with the shareholder deal.
Vinyl also purchased Serenade’s UK subsidiary on a debt-free, cash-free basis, for $1 with a 1 month put option, to expand the Vinyl.com business into the UK and European markets.
Max Shand launched Serenade in Sydney in mid-2020, having previously dabbled in music journalism after being Afterpay’s first employee a decade ago and spending 4 years there. He subsequently cofounded the millennial angels syndicate Strangelove Investments.
Serenade was initially a music celebrity message site for fans. That part of the business was sold in May 2023 and continues to operate as Dedicate VIP under new owners.
Shand then turned Serenade’s attention to NFTs in 2021, producing collections for a range of musicians, including Young M.A, Ladyhawke, and Super Furry Animals, collaborating with the Brit Awards in 2022 to create the event’s first NFT collection back when they were a craze.
The web3 music technology platform is now a digital collectibles marketplace in commercial partnerships with more than 100 record labels including Warner Music and Beggars, and has produced products for 200+ artists globally, including the Gallagher brothers of Oasis fame, Muse, Sum 41, Twenty One Pilots and Thirty Seconds to Mars.
Earlier this year Serenade launched NFC (near field communication) collectables, selling 12,000 units to superfans in the first half of 2024. The startup has been in discussions to expand their offering beyond music to sport and other entertainment sectors
The blockchain startup’s revenues will add around $2 million annually to Vinyl’s turnover, the company said, adding that Serenade operating at breakeven.
$7 million raised
Serenade raised $7 million from investors, including $6 million in March 2022 from several entertainment industry heavyweights, including Powderfinger’s Bernard Fanning, actor Hugh Jackman, Damian Christian of Atlantic Records, Reynold D’Silva of Silva Screen Records, Danny Rogers of Lunatic Entertainment, Paul Piticco and Jessica Ducrou of Splendour in the Grass, Jaddan Comerford of Unified Music, Nathan McLay of Future Classic, Dan Rosen of Warner Music, and former Afterpay boss David Hancock.
The acquisition deal leaves those investments under water. Vinyl Group also paid up to $20,000 in Serenade’s legal and accounting costs.
The merger allows Vinyl.com to expand its product offerings into physical and digital collectables whilst launching into additional markets.
CEO Josh Simons said Shand has built Serenade into a business with significant potential
“Through our acquisition of the platform, we’ll put the resources into Serenade to allow it to reach that potential. Vinyl Group is, at its core, a tech business and this was a great opportunity to expand our tech offering,” he said
Shand said he was “thrilled” to announce the deal.
“From our very first conversation, it was clear that [Vinyl Group CEO] Josh [Simons], [CFO] Jorge [Nigaglioni], and the board shared our vision for supporting artists and audiences through outstanding music products, and so I’m excited to see how this partnership accelerates our impact,” he said.
“I also want to acknowledge the incredible Serenade team, whose passion, integrity, talent, and dedication made this all possible.”
It’s been a busy month for Vinyl Group, owner of Brag Media, the local publisher of Rolling Stone and Variety, which it acquired last year for $10 million. Backed by WiseTech Global’s Richard White, Vinyl started September with the acquisition of media trade title Mediaweek for $1 million in a 50/50 split between cash and scrip. Last week announced events and brand activations business Funkified was also acquired for $1.8m in cash and up to $700,000 in shares.
Australia’s on ASX-listed music business also also owns music credits database Jaxsta, the company’s name before rebranded last year.
Vinyl raised $5.4 million in a fully underwritten accelerated Non-renounceable entitlement offer (ANREO) and is spending $2.3 million in cash on the Mediaweek and Funkified.
The company said it expects the acquisitions, in addition to organic growth across the group, to double Vinyl Group’s revenue run rate by the end of FY2025, from $10.5 million to $20m-plus, and it may seek more working capital in H2.
Vinyl shares are up 2% to $0.10 cents in afternoon trade today.
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