Dominating the industry’s agenda and context, the liberalisation of the US betting market post-PASPA has changed all working dynamics of the betting sector.
Following three-years of mass sector consolidation, European leaders believed that the betting industry had finally settled. On 14 May 2018, SCOTUS would announce its supreme drop of federal PASPA laws…Facing new realities, has a further US-centric round of M&A been triggered?
Opening the ‘M&A Panel’ at 2018 Betting on Sports Conference, moderator Scott Longley (MD – Clear Concise Media) asked seasoned industry investors of their ‘first impressions on US betting activities’?
David Shapton, Partner at Akur Capital observed ‘blurred lines’ as European incumbents are required to change their operating structures to service primarily land-based US casino operators. “What is intriguing, is that the major European B2C operators are to some extent fulfilling B2B roles, as US states will not allow outsiders to simply come in and gain operator licences.”
“This means that to have the outstanding offer, you have to have more of your tech in-house, offering the complete package. We are seeing, that proven operators entering the US market, are running ostensibly the processes of a B2B business, hence the interested parties are coming right across the industry”.
David Henwood, Director of H2 Capital pondered whether incumbents and investors fully recognise the potential size and scale of the US market. “We have run a deep dive on the opportunity, principally on two levels; the size of the current offshore market against the AGA’s $150 billion sports handle for 2016, we believe it could be bigger.”
Tracking the opportunity moving forward, Henwood and H2 believe that US sports betting could comfortably outstrip the UK betting market in value by 2023 (regulatory dependent). “There is an opportunity, however, the interesting play, for now, is where does the powerbase lie in terms of who will get a slice of the opportunity. At the moment the growth is very much in the hands of state legislators, and how they seize the opportunity…’“
On the question of power-plays with regards to US and European betting partnerships, such as do market conditions simply favour US natives over their new European settlers?
Ben Whitelock Partner at Wiggin LLP speculated: “As expected, US operators are better placed in terms shaping legislation and regulatory agendas. However, it’s important to recognise the cards European incumbents hold. US operators need access to European technology, customer acquisition tools, alongside operational experience and knowledge.
“The Europeans, can’t be as loud as US players on a legislative front. But that’s not important as both sides need each other, there should be no sense of arrogance between vested parties.”
Longley pointed to the initial joint-ventures formed between US and European incumbents, asking: “Do these joint-ventures point towards M&A, are these organic future deals?”
Replying Anton Kaszubowski, Founder of Greenlaw Limited suggested that at present there is a long way towards proving the value of initial JVs committed to by US and European parties.
“This is complex, as the market starts at the point of JVs. There are many components to bringing organisations together, culture being a major issue. Furthermore, are we looking at full integrations? At this early stage, we don’t know how the JV sportsbook entity will stand-alone within the larger groups. Therefore careful planning is needed if JVs are to reach their full potential, with leaders require to outline their value propositions. This is needed before any M&A can progress”.