Devising an effective M&A strategy
The next M&A deal to send shockwaves through the iGaming industry is never far away. Whether a business is looking to improve their offering in the US or sharpen certain in-house development capabilities, it has become commonplace for companies to directly acquire assets.
However, as we have seen in recent times, an M&A deal does not necessarily guarantee success and can often be a painful process of onboarding new staff and integrating technology.
Aspire Global is no stranger to M&A activity. The Malta-based iGaming company recently strengthened its offering with the acquisitions of sportsbook platform BtoBet and content aggregator Pariplay, helping to propel the organisation to new heights.
In an interview with 5 Star iGaming Media, Aspire Global CEO, Tsachi Maimon, talks us through the M&A landscape and how Aspire managed to successfully introduce two new organisations to expand its overall platform offering.
M&A is rife within the iGaming industry but is it always beneficial to an organisation? Is big necessarily beautiful?
It really depends on the DNA of the people that are driving the deal, as well as the individuals involved in the company being acquired. If there is a positive chemistry between the companies, this is an important sign that suggests they will overcome any potential challenges together.
Sometimes the company that is being acquired will have different ambitions and agendas, as well as wanting as little interference as possible. The trouble that some firms have is that a company acquired will head off in a different path to the acquirer. A good understanding of how to work together is crucial.
Interestingly, we have seen recently how B2C operators have targeted B2B suppliers in an apparent shift to ramp up their in-house capabilities. For instance, DraftKings acquired SBTech and in effect closed the B2B business, instead focusing on the technology for its own sportsbook. If you are a B2C operator, the B2B business is not your focus. I don’t know how the B2B clients right now of Relax Gaming will feel, when one of their competitors is the owner of their games. Time will tell as to how that unfolds.
In the frantic rush towards M&A – particularly in the US – what key mistakes do you think are being made?
In the US now, operators are fighting for market share. They are creating big holes in their pockets in order to satisfy growth. This will come back to haunt them in the next two to three years, as it will not be sustainable to continue to invest in such big marketing initiatives to attract new players. The US is a B2C market at this stage of growth, but in the long-term it will evolve to become a key B2B market.
Operators want to gain market share and the biggest players are now trying to own their technology. This will inevitably lead to B2B suppliers creating their own market share through the 30% of the market that is not owned by the big B2C operators. The likes of Entain, Penn National Gaming and LeoVegas have announced plans to develop more content in-house. The key operators will control a lot of their own technology, so B2B will focus on the online casinos and sportsbooks who will rely on third-party support.
How has the market valuation of gaming firms changed in recent years?
Kindred’s acquisition of the remaining outstanding shares in Relax Gaming provided some interesting insight into market valuations. From our perspective, we see Pariplay being valued at a higher price given that the company actually offers more services. In addition to being an aggregator and in-house studio, Pariplay has a remote server that means operators can integrate new games quickly, including land-based content which isn’t already available online. At a time when the digitalisation of casino is accelerating quickly, having access to this type of content that is familiar with land-based players is very important to operators. Secondly, we have sophisticated CRM tools that no other aggregator has, ensuring operators can improve the way in which they engage with players.
Given how Aspire Global has pivoted from being a B2C operator to focusing on B2B platforms, did this put you at an advantage when developing an M&A strategy?
This has been a key part of Aspire Global’s M&A strategy and has allowed us to grow efficiently in recent times. Understanding the pain that operators go through and the dynamics of different markets absolutely puts us at an advantage. Having the knowledge set of being both a B2C operator and B2B provider means we have become far more flexible in what we can offer to customers worldwide. That is not to say we will hold onto our B2C operations forever, that has been placed under strategic review, but that culture of work is still providing useful learnings for our B2B business today.
How did you look to integrate BtoBet and Pariplay into the Aspire organisation?
Our priority was to ensure they continued with the operations that made them successful entities in their respective fields. We have not interfered too much with their roadmap, instead offering the support and guidance to improve their capabilities. Management teams of businesses that have been acquired are typically quite cautious when engaging with their new employers, but at Aspire we made sure that both organisations felt comfortable from day one. For us, it was imperative that they remained the leaders and continued to push the boundaries, just as they did before becoming owned by Aspire. This has been a key factor in both BtoBet and Pariplay continuing to be successful providers in today’s marketplace.