Last year was marked by a wave of important mergers and acquisitions between some of the world’s biggest gambling operators. Ladbrokes and Coral Group announced that they would merge their operations to create the largest High Street betting shop chain in the United Kingdom valued at the total amount of £2.3 billion. GVC Holdings was selected as the preferred buyer of bwin.party, paying £1.12 billion for its fellow gambling company. Last but not least, Paddy Power and Betfair engaged into a £6-billion merger, thus giving rise to one of the world’s biggest gambling powerhouses.
After these significant happenings, it seems that it is now time for certain consolidation to take place within the suppliers’ sector. Early in April, provider of online gaming solutions NYX Gaming Group announced that it would buy sports betting and gaming software company OpenBet for the total amount of £270 million. An important feature of the major deal is the fact that it will be financed partly by gambling operators William Hill and Sky Betting & Gaming, with both companies being existing customers of OpenBet.
To say that the deal is important would be an understatement. The deal is, in fact, extremely important for the industry for a number of reasons and it will certainly have clear and definite effects on the way both B2B and B2C gambling services and products are to be provided in future. In other words, changes in the current online gambling landscape will certainly result from the transaction.
Details about the Deal
As mentioned above, NYX Gaming confirmed early in April that it would purchase its fellow developer and supplier for the total amount of £270 million from owner Vitruvian Partners. The private equity firm bought OpenBet in 2011 in a £208-million management buy-out. The popular sports betting and gaming software developer was not Vitruvian’s first foray into the online gambling industry. It had previously bought Inspired Gaming, which, too, has established itself as a leading provider of various solutions.
First reports for Vitruvian’s intention to sell OpenBet emerged last year. And earlier in 2016, it was suggested that Israeli gaming software giant Playtech was interested in purchasing the company. What is more, gambling operator William Hill announced that it would back NYX Gaming’s bid to buy OpenBet. As it could be seen, NYX Gaming was the company to be eventually selected as OpenBet’s preferred buyer.
In a nutshell, OpenBet, developer and supplier of a sportsbook platform and other gaming products intended exclusively for regulated markets, will be purchased by fellow gaming software developer and supplier NYX Gaming for the total amount of £270 million. Gambling operators William Hill and Sky Betting & Gaming will participate in the transaction by means of a £100-million equity investment. William Hill will back the deal by paying the amount of £80 million and Sky Betting & Gaming will pay the remaining £20 million.
In addition to this, William Hill has also engaged both NYX Gaming and OpenBet into a three-year development program aiming to further modernize OpenBet’s technology.
Expected Benefits from the Acquisition Deal
It is still too early to say whether and how exactly both the buyer and the acquired entity would benefit from the deal. Upon announcing that the transaction would take place, NYX Gaming said that it would give it excellent opportunities to extract significant revenue and cost synergies. The gaming developer and supplier expects revenue synergies of between C$8 million and C$10 million and cost synergies of between C$4 million and C$6 million.
Founded in 1996, OpenBet is among the pioneers in the provision of gaming and sports betting solutions for the international gambling industry. What is more, the company has been among the market leaders over the past two decades with its numerous solutions, available across all channels. OpenBet is known to be powering the largest share of the world’s online bets. In 2014 alone, the company took over 1 billion sports bets. Working with some of the largest gambling operators, with William Hill, SkyBet, Paddy Power Betfair, Ladbrokes, and PMU being only few of those, the gaming software provider is among the most trusted within the industry.
Bearing this in mind, NYX Gaming is adding an established and well-recognized business to its existing operations. Here it is also important to note that OpenBet operates exclusively in regulated markets around the globe. NYX Gaming’s main focus is on regulated markets, as well. With that said, the buyer will be offered the chance to expand into multiple jurisdictions with regulated online gambling markets.
Another important thing to take into account is the fact that NYX Gaming has not provided sports betting offering prior to acquiring OpenBet. It is not that the Canada-listed supplier offers a limited variety of gambling products. Quite the contrary, the company has been providing its numerous customers with a number of innovative solutions. Yet, as mentioned above, sports betting has not been an area it has delved into or at least, not for now. Thus, among other things, the acquisition of OpenBet will result in NYX Gaming completing its portfolio of products and services for its existing and future B2B customers.
As to how OpenBet would benefit from being purchased by its fellow developer and supplier of gaming solutions, the company is already an established name within the industry with long experience and expertize in the field and a cluster of renowned B2B clients. However, being part of a larger group will certainly provide it with more opportunities to expand its global reach, to attract greater attention among gambling operators in regulated markets, and last but not least, to invest in development, innovation, and further diversification of its product offering.
At a first glance, both parties will derive certain important benefits from the transaction. What is more, it has everything needed to secure NYX Gaming’s overall growth as well as OpenBet’s own development within the group. However, concerns have been voiced about the future of the sports betting supplier, particularly given the fact that its purchase has partly been funded by two of its current customers.
What May Cloud the Deal’s Success?
In order to comment on what could possibly cloud the transaction’s success, we should first pay a little more attention on OpenBet’s buyer or rather on the fact that OpenBet is being purchased by a fellow gaming developer. Many would say that this is the best possible outcome – an established supplier of gaming solutions with a wide customer base buys the sportsbook platform provider.
There is, however, an important detail to be taken into consideration. The transaction is partly financed by two major gambling operators that are also customers of the company being sold. Although all involved parties have ensured that William Hill and SkyBet will have no say in both NYX Gaming and OpenBet’s operations, many have voiced concerns that this will not be the case once the deal is closed.
The recently merged Paddy Power Betfair welcomed the announcement, expressing hopes that the combined entity will continue delivering “a great product and service.” However, it seems that other gambling operators have taken a less open-minded stance on the matter. Reportedly, Ladbrokes was among the existing OpenBet customers to have received the news about the transaction with certain reserves.
NYX Gaming and OpenBet’s potential to deliver excellent gaming and sports betting products is undoubted. However, to what extent William Hill and SkyBet will be involved in OpenBet’s future course of development and whether their involvement will only be limited to the two operators being part of the cluster of major companies to be taking advantage of the provider’s sports betting platform is a question that deserves further consideration. And it is probably a question that will not be answered in a manner that would satisfy all involved parties.
Still, it would not be an exaggeration to say that this turn of events was probably the best one for both OpenBet and its existing customers. To illustrate this point, here is another possible outcome of Vitruvian Partners putting OpenBet up for sale – the latter could have been purchased by a gambling operator. There certainly are gambling companies out there that would gladly consider the opportunity to come into possession of a software provider, thus expanding into a completely different niche and securing themselves with their own studio for the creation of branded product offering.
That would have been an excellent outcome for the potential buyer. However, it would not have been that beneficial to OpenBet. The main reason is that if bought by a gambling operator, particularly by one that is an existing customer of the software developer, other clients would not have been happy with the turn of events. They would have been concerned about the integrity of data they have been sharing with OpenBet, and rightfully so. There would have certainly been operators willing to end their relationship with the supplier.
Indisputably, NYX Gaming’s decision to buy OpenBet is an extremely important event within the industry that will certainly result in certain changes taking place and those will not only affect the two companies but also their competitors in the market. However, it is still too early to say whether the changes will be positive ones or will have adverse effects. It will also be interesting to see whether the transaction will unleash a wave of mergers and acquisitions among other providers of online gambling products.
One thing is for sure, the deal will most certainly change the current outlook of the gaming suppliers’ market, giving way to new leaders and opening positions for new entries. It all shows that interesting times are coming for the online gaming industry.
Following the announcement that NYX Gaming would purchase OpenBet, Lorien Pilling, Research Director at Global Betting and Gaming Consultants, has shared with us his thoughts on the matter:
OpenBet was acquired by another provider of solutions for the international gambling industry, although one with no experience in the betting market, and the deal was partially financed by two leading gaming and betting operators. On the other hand, the supplier could have been purchased by a gambling operator or several gambling operators and this would have probably not been welcomed by existing customers of the company. Last but not least, the company could have been acquired by Playtech, which has repeatedly pointed its determination to turn into an industry leader. Which do you think would have been the least-favorable outcome for OpenBet and for its customers alike?
OpenBet is key supplier to many of the sector’s leading spotrsbooks. When such a strategically important business is acquired there will clearly be concerns for the various vested interests – customers and other suppliers.
The deal that has been done is probably the best one for the sector overall. OpenBet customers would have been more concerned if it had been sold directly to one of their competitors.
Equally, if it had been sold to Playtech, such would have been that company’s dominance over all areas of the gambling software sector, it could have diminished competition in the sector. Some operators have had turbulent relationships with Playtech in the recent past, which could have given them concerns if it had acquired OpenBet.
What would the acquisition mean for William Hill and Sky Betting & Gaming, the operators that financed it?
SkyBet and William Hill benefit from an element of diversification. They have taken a stake in a B2B software business, without getting involved in B2B operations directly.
As mentioned above, NYX Gaming has not offered sports betting products, prior to acquiring OpenBet. Do you think that it would be able to successfully handle operations it has little knowledge of?
One would hope that NYX would recognise OpenBet’s experience and expertize in sports betting and not get rid of that. It shouldn’t be an issue that NYX Gaming has specialised only in gaming to date.
