At the beginning of the year, 2011 was being touted as the year of the mergers. A year where we would see iGaming companies flock in their numbers to the bargaining table to partner up in the hope of being able to compete with the largest operators out there.
Much of this speak was inspired by the merging of bwin and PartyGaming to create bwin.party Digital Entertainment. This deal was hailed as one of the industry’s biggest and created one super iGaming company that represented an impressive 12% of the entire industry play.
The merging of the two company’s affiliate programs earlier this month signals that there is at least one deal that is here to stay. Rather than dealing with Bewinners or PartyPartner, affiliates will soon have the pleasure of dealing with one affiliate program that operates across multiple brands.
bwin.party Digital Entertainment is now very much alive and well after suffering a rocky patch in terms of share prices. However, the company is still some way away from being the all-engulfing super iGaming company that some had predicted or even feared.
This super company’s failure to realise its true potential has been touted as one of the major factors that have contributed to the lack of mergers across the industry. Effectively smaller iGaming companies are taking note that joining forces certainly isn’t a one-way ticket up easy street.
Back in August, a Bodog Europe chief executive spoke to Calvin Ayre about mergers. He certainly subscribed to the view that some were being put off by bwin.party’s trials and tribulations.
He explained: “So far in this industry we’ve only seen one big merger and that is the pwin merger and for me it’s not shown any success so far.
“It’s a tricky road to move forward to do these things because there are no obvious benefits if you merge two companies of the same size.
“You will have two years where you’re standing still before you can move ahead and those two years are going to cost you. We’re seeing the same thing now with the pwin merger that they’ve been standing still now more or less for over a year.”
His pessimism regarding the success of mergers is certainly well founded and is by no means a new one. Twelve months ago, he spoke to eGaming Review and argued that global domination was far from guaranteed for the company. He also expressed his feelings that mergers weren’t going to be quite as common as many were suggesting.
It’s now the end of 2011 and rumours and even talks have mergers have come and gone throughout the year. However, there have been some close calls.
Ladbrokes
The popular UK bookmaker was one of the companies that many thought were most likely to form some kind of deal in the iGaming industry. This reasoning was due to CEO Richard Glynn’s plans to rejuvenate the digital side of the business, which included intent to join forces with or acquire a pureplay operator with a better understanding of the market.
However, Ladbrokes’ two highest profile talks of the year ended unsuccessfully. The first came with 888 Holdings but the deal officially collapsed after four months of talks in April. During this time, 888 CEO Gigi Levy announced his departure for the company just before the announcement regarding the termination of talks was made.
Six months on and news surfaced that Ladbrokes’ talks with Sportingbet were terminated. This time the problem between the two was Sportingbet’s Turkish business, which Ladbrokes opposed. Unfortunately, the risk was deemed to great and another of Ladbrokes’ potential deals passed them by.
For Sportingbet, this wasn’t the only time that they dipped their toe into to merger water either as talks with Unibet ultimately proved fruitless. Even their reported attempt to re-launch the deal in March this year ended unsuccessfully.
Joint Ventures
Then there was of course the talk regarding a joint venture between Playtech and Ladbrokes. The supposed talks that took place were deemed so serious by Ladbrokes’ rivals William Hill that an injunction was taken out to prevent further discussions.
Any iGaming companies that were still eying up a joint venture as a way of easing themselves into the merger frame of mind will surely have now been put off.
Staff boycotts, resignations and break-ins to secure servers must have been enough to scare many a company – one thing is for sure, Hills are likely to pick a partner much more carefully next time.
The US
Despite the high number of factors weighing up in the argument against mergers, one issue means that there could still be a large number of iGaming companies finding a friend in the near future. This is of course the US and the opportunities available to enter the market.
Conventional wisdom appears to currently suggest that the best way for iGaming operators to make their way into the US market is to join forces with a company already based over there. This is going to come in the form of casino companies and has already taken place in some instances.
888 has managed to overcome the heartbreak sustained by their failed Ladbrokes deal to lead the charge in this way. The Gibraltar-based company has formed a deal with Caesars and will look to operate in the US with or without the use of their 888 brand.
Bearing this in mind, there is hope for mergers but it’s a tricky road.
