“ There is a well-established process for navigating M & A activity in the gaming industry . Ensuring the business lawyers working on a deal are communicating with gaming advisors is key to ensure complications are minimized .”
— Robert Russell , Chief Gaming Analyst , RMC Legal
“ One piece of advice we always give at the start is for the foreign company to let us meet with its UBOs and directors to explain U . S . licensing , and why they will need to be a part of the disclosure . Also to explain the confidentiality provisions that govern this information .”
Sometimes the process can be expedited by using expert outside counsel , Shepherd says . “ The first thing is for your U . S . legal counsel to understand the product or service to determine if licensing is required in the targeted jurisdictions ,” he says . “ The next step is to match up target customers and the jurisdictions in which they are licensed to determine the jurisdictions where the new entrant will make the most impact . It does no good to get a license in a jurisdiction where you won ’ t make any money because you have no customers or you cannot compete effectively . It is important to evaluate the costs of entry into the market and timing as compared to the potential rewards .”
Di Chio has seen it all , so he has some strong suggestions on an entrance to the U . S .
“ Develop an understanding of both the U . S . market as a whole and the individual states which have chosen to regulate iGaming and sports betting ,” he says . “ Understand the operators which are already in the market and their strategies for gaining market share . Then understand the U . S . player , their habits , what they like and what they don ’ t like .
“ That ’ s the beginning of the framework for the entry plan . You must also engage with everyone you can , be it land-based operators , regulators or suppliers catering to the U . S . market . If you are already working with them ( operators and suppliers ) in other markets , then you have the foundation and the opportunity to broker the expansion of those relationships to the U . S . market , to the benefit of both parties .”
Staudenmaier says new companies coming into the U . S . need to understand every aspect of the market and the compliance landscape .
“ Do your homework !” she insists . “ Don ’ t try to enter every market , whether it ’ s a state or tribal jurisdiction . Start with a targeted approach as to which jurisdictions make the most sense from an economic perspective . Once the company has determined its target markets , engage competent outside counsel to assist with the regulatory requirements .”
MERGER MANIA
The prospects of success in the U . S . for operators and suppliers alike sometimes are determined by business decisions that would include the purchase of , or merger with , other companies . That provides more compliance issues for both parties . Schrier believes there are always issues with M & A activity . “ Clients from foreign countries find the M & A activity to be challenging ,” he says . “ Often , the parties focus purely on the business terms and give little thought to the regulatory implications . Because gaming licenses are not transferable , every state regulator has its own rules on how a change of ownership must be approved , or documented .
“ Deals are done ‘ subject to regulatory approval ’ but that means a variety of things and typically months of individual discussions and filings with all the reg- ulators that oversee the companies involved . Of course , in the deal itself , the regulatory history of compliance by the seller is critical to the buyer , so they do not inherit a compliance nightmare . Coordinating the deal with regulators adds substantial time and effort ( and cost ) to the transaction because of these factors .”
Di Chio ’ s company , Bragg Gaming , has used M & A to significantly grow the organization .
“ M & A activity is a natural part of any industry ; it ’ s just what occurs in the normal course of business ,” he explains . “ Addressing the demands it places on compliance , there are the obvious moving parts of adhering to all competitionbased regulations , as well as dealing with things like the transfer of operational licenses , and any certification concerns which might arise .
“ For example , when we acquired U . S . -based Wild Streak Gaming in 2021 and Spin Games in 2022 , we had to craft a compliance program which involved integrating complex software solutions across multiple regulatory jurisdictions . This required extensive coordination to ensure that operational licenses were aligned with local regulations in each market .
“ It was a process which took time to complete , but was ultimately beneficial as it allowed us to significantly bolster our global content development and increase our U . S . content delivery and distribution . I wouldn ’ t necessarily say M & A increases the compliance complications per se , primarily because any iGaming company should be naturally aware of what it is to remain compliant in any given market . This just adds a new dimension to the process .”
Russell states that M & A has always been a part of the gaming industry — land-based or online — so if companies understand how it works , there should be no problems .
“ There is a well-established process for navigating M & A activity in the gaming industry ,” he says . “ Ensuring the business lawyers working on a deal are communicating with gaming advisers is key to ensure complications are minimized . Nine times out of 10 , when licensing complications occur is when gaming advisers are not brought in early in the transaction to ensure what is proposed from a business standpoint can meet licensing requirements .” Shepherd says the process can sometimes seem chaotic . “ M & A transactions , especially in the manufacturing / distributor and sports wagering sectors , create much angst regarding compliance with licensing and regulatory requirements ,” he says . “ Typically , the transaction documents call for all applications for regulatory approvals to be filed within a certain number of days of execution of the agreement .
“ Then there is a mad flurry of activity to determine the persons / entities required by the regulators to file applications and to gather the information necessary to complete the applications ( some states use physical paper applications while others can only be completed using fields in online forms that are not flexible in accepting information ).
“ Different states have different ideas of what information is important and whether the information must be provided up front with the application forms or later during the investigation . Then you have to deal with the logistics of having busy people interrupt their days to execute multiple application forms in multiple states .”
36 Global Gaming Business OCTOBER 2024