If 2015 was a banner year for merger and acquisition deal-making within the industry, 2016 has been a year of transition, of finalization of the deals in question, and of getting accustomed to the new gambling environment.
It is too early for adequate prognoses about what 2017 has in store but there have been prominent signs that certain consolidation will likely take place and some of the global gambling industry’s biggest names may be involved in the process.
In 2015, three pairs of major gambling operators joined forced to create behemoth enterprises with multi-channel presence across multiple jurisdictions. All three deals were finalized over the course of 2016 and the combined entities have been busying themselves with integrating and rebuilding their businesses.
Although 2016 has been a generally quite year in terms of merger and acquisition activity, there were several more noteworthy consolidation undertakings. Canada-listed online gaming provider NYX Gaming Group acquired its counterpart OpenBet for the amount of £270 million. Another leading industry provider, Playtech, also expanded its operations in both its gaming and financial divisions with several strategic acquisition deals announced throughout the year.
Major operators like William Hill, 888 Holdings, The Rank Group, and Canada’s Amaya were all involved in merger and acquisition talks. And although no deals were negotiated, the companies have made clear statements that they were looking for opportunities to join forces with others of their kind.
Before making any guesses for future M&A activity, it is probably a good idea to look at what urges companies, valued at billions of dollars/pounds/euro to initiate and engage in such activity and potentially partner with their biggest rivals.
What Prompts Industry Consolidation?
At a time when gambling regulators and lawmakers are introducing new taxes and ratcheting up existing ones, it is only logical for gambling companies to look for ways to cope with increased costs and ensuing losses.
What is more, the global gambling market has become a highly competitive space and merging with or acquiring some of their biggest competitors is believed to be an effective means for both operators and suppliers to survive in the challenging environment.
Last but not least, the industry is in a transition period which sees companies investing sometimes madly in technology to improve their online gambling offering and attract more and more players from land-based facilities to desktop and mobile channels. Combining with fellow gambling businesses could certainly help them offset technology costs to a certain extent.
New regulatory requirements and updated tax systems will probably turn into the main driving forces for M&A activity in 2017. The UK government has recently announced that freeplays and other such comps offered to online gambling customers will be taxed from August 2017. In addition, a crackdown on the highly controversial fixed-odds betting terminals in UK betting shops is likely to be launched in early 2017.
Outside the UK, Australia is gearing up for an offshore online gambling crackdown, several jurisdictions are exploring the possibility to regulate their markets, and other, already regulated, jurisdictions are exploring possible amendments in their laws.
Bearing in mind that the introduction of the Point of Consumption tax two years ago unleashed an unprecedented wave of consolidation within the industry, another such wave in 2017 will barely surprise any industry insider.
Our Predictions for 2017
+ William Hill
William Hill’s name was involved in two M&A deals in 2016. Although the company walked away from talks, the mere fact that it had engaged in such talks indicates that it has been considering the opportunity to merge with another gambling company, acquire or be acquired by such company. William Hill has a serious profit squeeze to cope with and will probably continue focusing its attention on improving and boosting its online division, so our prediction is that the operator may join forces with a company with a strong online presence.
+ 888 Holdings
The online gambling operator has not been hiding its ambitions for finding a suitable counterpart to join forces with. In fact, 888 Holdings and William Hill have been circling each other for several years now. Their mutual approaches towards one another have failed but 2017 may be the year when they will eventually persuade each other into a matrimony.
+ Ladbrokes Coral
Ladbrokes Coral has just been formed, becoming the owner of UK’s largest chain of betting shops. Although the merged entity has seemingly secured a good position in the UK gambling market, it certainly has reasons to worry about its place in Australia.
Hard times may be coming for offshore operators providing gambling options to customers from Down Under as country officials are set to embark on an iGaming clampdown. Over the past two months, Ladbrokes Coral’s name was involved in two potential M&A deals with Australia’s leading gambling companies – Tabcorp and Tatts. We believe that the UK gambling company’s appetite for a bigger piece of the Australian gambling pie will become more acute in 2017 and that it will keep on approaching local operators.
The gambling technology company has clearly stated that acquisitions are an important part of its growth strategy. This probably means that its shopping spree is far from over. We expect that the company will add a few more businesses, both gaming and financial ones, in 2017. Over the years, word has leaked out here and there that Playtech may be interested in acquiring a gambling operator. The company may manifest such interest in 2017.