GPWA Times Magazine - Issue 33 - October 2015

necessary. The result has been a trend of mergers and acquisitions between major players in the industry. “We’re still in the aftermath of the Great Recession, and companies are adjusting their business models to take into account that, from 2007 to 2014, there’s been less consumer spending available for gam- bling,” says Warwick Bartlett, CEO of Global Betting and Gaming Consultants (GBGC). “The new tax means the con- sumer now has even less money to spend, because he’s losing money quicker, and therefore the industry is finding it diffi- cult to increase its revenues. This is caus- ing consolidation.” bet365 currently dominates the top spot in the industry. The company’s £1.28 billion in gross gaming yield (GGY) in 2014 was nearly double that of any other company, according to data provided by GBGC. But others are banding together in an effort to close that gap. In June 2014, Montreal-based Amaya Gaming pur- chased online poker giant PokerStars and sister site Full Tilt Poker for $4.9 billion. PokerStars finished 2014 with £687.1 mil- lion in GGY, second only to bet365. Amaya’s purchase of PokerStars backed the rest of the industry into a corner. The aquistion hit bwin.party, which operates Party Poker and is one of PokerStars’ chief competitors, especially hard, as its stock took a large dip in the aftermath of the deal. As a result, bwin.party decided to merge with another company to compete. In July 2015, 888 Holdings agreed to buy bwin.party for $1.4 billion. The merger between the two companies is a natural fit, as the two operators would combine to form a formidable rival to PokerStars in online poker, in addition to offering leading sports betting and casino prod- ucts. According to data from GBGC, the companies’ GGYs in 2014 would combine to total £770 million, placing them ahead of PokerStars and second behind bet365. The deal is far from complete, however. In August, GVC Holdings submitted a $1.6 billion bid for bwin.party. Unlike 888, GVC is a small company (£175.6 million GGY in 2014, ranked 13th in the world) that focuses mostly on “gray” jurisdic- tions. Its proposed deal involves a stock swap between investors of both firms, and the general consensus is that bwin.party does not want to take the risk of venturing with GVC into unregulated markets. “(A deal between) 888 and bwin.party makes the most sense because they are both listed companies on the London Stock Exchange, and because of that, they are turning off trading in gray jurisdic- tions,” Bartlett says. “Their platforms are also more compatible, so there will be fewer integration costs. And 888 has proven that their (customer relationship management software) is excellent.” Meanwhile, sportsbook-focused com- panies Ladbrokes and Coral are in the middle of a merger that will make the new firm the largest operator of brick- and-mortar betting shops in the U.K. The deal would be a boon for each company’s struggling online businesses as well: Ladbrokes-Coral (£523 million combined GGY in 2014) would rank fifth in revenue, COVER STORY Leading interactive gambling companies by 2014 gross gaming yield Company GGY (GBPm) 1 bet365 £1,284.2 * Paddy Power-Betfair £832.2 * 888-bwin.party £770.0 2 Amaya (PokerStars) £687.1 * GVC-bwin.party £653.6 3 William Hill £649.3 * Ladbrokes-Coral £523.0 4 bwin.party £478.0 5 Paddy Power £438.6 6 Betfair £393.6 7 Unibet £312.0 8 888 Holdings £292.1 9 Ladbrokes £288.3 10 Betsson £251.6 11 Coral £234.7 12 Skybet £183.0 13 GVC Holdings £175.6 Source: Global Betting and Gaming Consultants Mergers and acquisitions: How affiliates fit into the online gambling ‘new normal’