MERGERS AND ACQUISITIONS
opportunities elsewhere although the increased investibility of the industry means financial players will continue to be active. The final fly in the ointment was regulatory uncertainty in Europe. Delays to the UK Gambling Act Review and the looming spectre of affordability checks coupled with the prospect of higher taxes meant gloom in Britain, but that was only part of the picture. Advertising bans and other regulatory tightening around Europe and a stalling of reforms in Germany reduced confidence further. Taken together, these factors combined to bring a malaise to M&A, but that looks likely to change. Fundamentally, M&A in the gaming and gambling industry is a consistently attractive strategy. Whether the aim is rapid expansion into new markets, access to new technologies or regulatory efficiency gains, acquisitions and other tie-ups can tick a lot of strategic boxes.
The logic behind acquisitions is further strengthened by low share price valuations that have dogged the industry in recent months. That is making some companies look like a bargain and the big players are likely to back themselves to quickly reap the benefits of a valuation bounce. Europe similar but different and Latin America is opening up On the face of it, FDJ’s all-cash offer for Kindred follows a similar logic to the deals in the US. The acquisition, which values the Swedish operator at €2.49 billion, strengthens FDJ’s position in igaming as well as creating the second-largest player in Europe. The deal represents a step change for the former French state- owned lottery, but elsewhere in Europe consolidation is being driven by different factors. Some company turbulence in the form of a failed buyout (888), CEO departure (Entain) and underperforming share prices seen throughout the industry suggests Europe remains fertile ground for dealmakers. Regulatory headwinds (read advertising bans, other regulatory tightening and tax rises) are encouraging other European players to look outside the EU for their growth, however, and there are some attractive target markets to look at. Emerging Eastern Europe is firmly on the industry’s radar with some local players looking possible either as predators or prey. 888Africa reportedly hit one million customers across the continent in 2023, barely a year after launch, showing the way to growth in a continent with huge potential. Nigeria’s Nairabet is among the local companies that could be of great interest to international players looking for a quick way to buy in. One of the most exciting developments in recent months has been the opening up of Brazil as a legal gambling market at the turn of the year. As we reported in January, the technical niceties of the legalization favour acquisition or joint venture as a market entry strategy for international operators. 1 In this issue we look at northern neighbors Colombia where similar dynamics are fuelling M&A activity.
Big US players are moving into profitability
Whilst some of the negative factors remain, 2024 has some overwhelming positives. In contrast to Europe’s woes, the mood is increasingly bullish in North America. After being part a landgrab as each US state legalized sports betting, the big winners and their shareholders are starting to see a payback. Draftkings set the early pace announcing adjusted EBITDA for Q4 2023 of US$151 million, a swing of almost US$200 million in the right direction when set against the same period a year earlier. Making the case for an uptick in deals, no sooner had the announcement dropped than Draftkings closed a US$750 million buyout of Jackpocket. At a stroke the acquirer added digital lottery to its other operations in fantasy sports, sports betting, casino, NFTs and technology.
The money tap is set to keep on gushing with predictions from Draftkings that the US market will reach US$30 billion by 2028, a 50 percent jump on 2023. And that is without any more states legalizing gambling. Market leader and FanDuel owner Flutter may have gone quiet, but moving its listing from Europe to New York gives a big hint as to where it sees future deals will be done. Big players throwing off cash will no doubt prompt some deleveraging, especially if interest rates remain high. The temptation to do deals will be strong, however, as smaller players who have struggled to break through in the US decide to exit the market. 1 https://www.imgl.org/publications/imgl-magazine-volume-3-no-1/brazil-scores-a-winning-goal-with-sports-betting-igaming-regulations/ Away from the headline grabbing B2C deals there are significant opportunities behind the scenes. Game developers, sports data providers, platform businesses and affiliates share some common characteristics that make them particularly attractive. They have all benefitted from high B2C growth many having
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IMGL MAGAZINE | APRIL 2024
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