Maltese gaming M&A
to increase by game type in the betting segment, which will gain €20,524.8 million of global annual sales by 2025. Opportunities in the mobile segment will also rise, gaining €33,986.5 million of global annual sales by 2025. The online gambling market size will gain the most in the USA at €8,102 million. These numbers are quite astounding, and it certainly promises to be a very interesting ride ahead! It has increasingly become a matter of “hunt or be hunted”. Malta as European Gambling Hub Malta established itself as a hub for online gambling regulation as early as 2001, recognising the need for a robust regulatory framework to support gaming operators having global strategies and ambitions. The legal and regulatory framework was recently modernised, through the implementation of several changes driven by consumer trends and political developments. Evolving technologies and game-play preferences set the scene for a robust, technologically neutral framework which also introduced principles of “mutual recognition”, attributing regulatory equivalence to operators holding licences in jurisdictions offering suitable regulatory protection to consumers. This last initiative was undertaken in the context of the rise of national regulatory frameworks for online gambling across the EU Members States. The 2018 amendments also introduced additional controls, based on the regulatory learnings garnered during the previous eighteen years. Malta’s regulatory framework, supported by a reliable telecommunications infrastructure (high speed internet across the island) and specialised professional and technical support, is still highly attractive for operators having a global strategy. Large gambling groups all run certain components or brands out of Malta. This “pull-factor” has seen several fledgling online casino, poker, sportsbook, betting exchange and fantasy sports operators call Malta their home, providing them with the right environment to grow into sizeable market contenders, drawing the attention of the large gambling groups looking to increase market share, or introduce new technologies and content. A Buyer’s Perspective Within this context, buyers in the online gaming space frequently encounter Maltese components within merger and acquisition deals. There will typically be one or more Malta-based companies included within the transaction, necessitating the engagement of legal, tax and financial advisors in Malta to assist with the pre-acquisition due
diligence process, structuring and the completion of all conditions precedent for the finalisation of the transaction. During our daily legal practice, we have handled several acquisitions in the gambling space. Whilst we have acted for sellers, investors, investment banks, commercial banks, private equity funds, venture capital funds, institutional lenders, and management groups, the bulk of the deals we work on are on the buy-side. Whilst no two deals are ever the same, our role typically involves leading on all the Maltese legal and regulatory aspects, handling the legal, employment and regulatory due diligence, drafting or reviewing the heads of terms and share purchase agreement, structuring the financing documentation relating to the deal and co- ordinating the accomplishment of all conditions precedent, necessary for completion. Whilst deals vary in their approach, size and nature, the bulk of what we see is structured as an outright acquisition of shares in the Malta target (usually a holding company which, in turn, owns a Malta-licensed gaming operator subsidiary), as opposed to asset deals. When they do happen, asset deals tend to be somewhat more complex, requiring the careful legal definition and treatment of IP assets and of the associated rights and corresponding liabilities being undertaken by each of the parties to the deal. Regulatory Approvals Maltese law provides that any direct or indirect shareholding of 10 percent or more in the equity of a company licensed by the Malta Gaming Authority (MGA) or any financial investment or financial contribution to the share capital or working capital of a regulated gaming company, or the control of voting rights in such company is considered to constitute a “qualifying interest”. Once the “qualifying interest” threshold is established, any transaction involving a change in that qualifying interest must be notified by the licensed entity to MGA no later than three working days after the change takes place, with all supporting documentation relating to the transaction being submitted to the Authority within 30 days of such a change. The documentation to be submitted to the Authority within the 30 day statutory period, includes updated regulatory forms and enclosures for each new entity in the structure, updated policies (if any), updated personal declaration forms and enclosures for the proposed ultimate beneficial owners (UBOs) and directorship changes (if any), the relevant corporate resolutions approving the transaction, certified copies of the corporate registers relating to the deal, as well as assessing the source of funds for the consideration. This process involves a significant administrative exercise,
IMGL Magazine • July 2022 • 11
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