[C O L U M N I S T ]
A N T H O N Y O H
Senior VP
NewShore Partners
US ONE YEAR ON:
A review of transatlantic activity
NewShore Partners' Anthony Oh takes a look at the past 12 months and whether there is cause for optimism in a country where regulation still remains way down the political agenda
s G2E ends for another year it is worth re?ecting on some of the major developments that have occurred over the past 12 months. At last year’s event there was a sense of anticipation that online gaming in the US was on the cusp of a breakthrough. Landbased equipment suppliers, such as Bally Technologies, launched new interactive divisions (since joined by WMS), while Aristocrat Leisure unveiled its inaugural free-to-play site Maryland Live! Post-G2E, bwin.party added to the excitement by announcing its partnership with leading operators MGM and Boyd Gaming. By year-end the buzz within the industry was at fever pitch, as the DoJ clari?ed its position on the Wire Act, reclassifying it to sports betting only. It was believed the DoJ statement, together with the various state and federal proposals, would act as a catalyst for a wave of transatlantic M&A activity with US land-based predators devouring their European online counterparts. Despite the fact that the 'rule had been run' over many of the major online companies in Europe, it was evident from discussions with major US players that this wasn’t necessarily going to be the case. Following IGT’s very public issues with its Entraction purchase, potential US acquirers have become gun-shy of undertaking signi?cant acquisitions and paying full valuations for European assets, only to have to shut down a number of grey and black jurisdictions post-acquisition. While acknowledging that newly regulated markets in Europe presented interesting opportunities, their ring-fenced nature meant that potential acquirers felt it would be harder to compete with local incumbents. Throw in a potential 15% GPT in the UK, and you have a dampener on any signi?cant cross-border activity. This is not to say that the past year has not been an active one for corporate activity. US equipment suppliers have gone on a shopping spree for European assets. The most notable was Shuf?eMaster’s (now terminated) agreement to acquire
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Following IGT’s very public issues with its Entraction purchase, potential US acquirers have become gun-shy of undertaking signi?cant acquisitions and paying full valuations for European assets
Anthony Oh
the Ongame network, quickly followed by Bally Technologies’ acquisition of Chiligaming’s B2B assets, WMS’ acquisition of Jadestone and Scienti?c Games’ purchase of P arspro. As the US opportunity materialises, these traditional land-based suppliers are looking to gain the expertise and technology needed to leverage their existing relationships with casinos and lotteries – shutting out their European competitors. One trend that caught the industry off guard was the emergence of the social casino space, highlighted by IGT’s acquisition of Double Down. Interest in this area may have peaked following Zynga’s recent performance but this has not stopped social casino operators looking to capitalise by either selling out or raising funds from venture capitalists. Indeed, interest remains from buyers on both sides of the Atlantic. In the US and other markets where real-money online slots are not yet permitted, virtual currency offerings are seen as a way to build online brands and player databases. In Europe, the focus is more on taking advantage of real-money gaming on Facebook, either to access a new pool of players or to protect against cannibalisation of existing players. Questions still remain over the conversion rate between social to real-money players and the long-term sustainability of these businesses once real-money online slots are introduced. Only time will tell and, at present, both Gamesys and Facebook are maintaining radio silence. I expect to see more partnerships and commercial agreements between European and US players, as opposed to signi?cant M&A activity in the next year. US operators and suppliers not only have the bene?t of existing licences and relationships with regulators, but have also deployed signi?cant lobbying resources to ensure their interests are kept at the forefront of decision makers’ minds. With European players eager to sign partnerships with their US brethren, why would US players risk undertaking a large M&A trade now?
Anthony Oh is senior vice-president with NewShore Partners. He previously worked at Aristocrat Leisure and has been an investment banker to the gaming sector for the past seven years, during which time he has advised companies including Cashcade, Playtech, Pokerstrategy.com, Product Madness and Costa Bingo.
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