FEATURE
behind the successful BettingExpert and
SmartBets websites, which inked a deal
at the start of June to buy the German-
speaking affiliate SportFreunde for a sum
believed to be more than €10m.
Jumping on the
consolidation bandwagon
Jesper Søgaard, the founder and chief
executive of Better Collective, tells iGaming
Business that “this is the time to be joining”
the rush towards M&A. “There is no doubt
that there is an industry trend to begin
consolidating, and we have been ready to
join the fray for quite some time.”
He adds that he believes scale will only
grow in importance as a factor in the
affiliate arena. “The impression we are
receiving from the operators is that they
prefer to work with bigger partners, so
from that perspective it is advantageous to
consolidate,” he says.
Charles Gillespie, chief executive at
Gambling.com Group (formerly KAX
Media), which has also joined the M&A fray
in recent months, is far less certain, however,
that operators will be quite as welcoming of
the trend towards enlargement among their
affiliate client base.
“The smart operators are already
concerned about this,” he said. “They see
themselves ending up working with four
or five very large affiliate organisations
that have a substantial amount of power.
They are already considering the strategic
ramifications of this trend.”
One such net effect of the M&A is that
the affiliate sector should become more
efficient. Notably, in the case of many –
but not all – of the Catena Media deals
announced to date, up to a third of the
potential total sale price consists of earnouts.
That fact holds a clue as to what Catena
Media hopes it will achieve via leveraging
these assets by plugging them into its own
patented content management system, by
which it believes it can enhance revenues
across the group.
With the Bettingpro deal – which didn’t
contain an earnout – Catena Media has
added a substantial content production unit
of up to 30 journalists to its business. Yet of
equal importance is that the existing casino
side of the business currently contributes
circa 10% of total revenues. The new
owners will doubtless feel confident they
can improve revenues here.
Søgaard says Better Collective similarly
hopes to identify “mutually beneficial
acquisitions”. He explains: “The companies
we consider acquiring have caught our
eyes because they are doing something right
— it makes no sense to just take over and
close down existing protocols to implement
our own.
“What we look for are ways that our
companies can learn and benefit from
each other, and help increase the value for
all stakeholders.”
arena is also, as suggested from our Catena
Media analysis, on the rise. “There is no
doubt that prices will be affected with the
introduction of more buyers,” says Søgaard.
Gillespie agrees that pricing expectations
have “soared” but he suggests that is yet
to translate into deals closing at higher
multiples. “There are still affiliates out
there willing to be bought for reasonable
multiples,” he adds. “Until that supply is
completely exhausted, then there will be no
need to close deals at higher multiples.”
As for further M&A deals, these would
certainly seem to be highly likely from
all the indications of market participants.
Søgaard says Better Collective is in
discussions with affiliates working in
both the sports and casino verticals.
“The smart operators are already concerned about this.
They see themselves ending up working with four or five
very large affiliate organisations that have a substantial
amount of power”
Charles Gillespie, Gambling.com
Looking at the value chain
A handful of operators are taking a different
route and buying their own way into the
traffic business, including Cherry Gaming
and Gaming Innovation Group (GIG), and
there are indications that others might also
take the direct route.
Stockholm-listed operator Mr Green
announced in June it had raised SEK195m
(€20m) to fund potential acquisitions and
a spokesperson for the company confirms
it its seeking deals in “all parts of the value
chain” including potentially affiliates.
Gillespie believes the “logic” of operators
buying up affil iate assets is clear. Referring
to GIG’s deals – which include two deals
earlier this year for a German-language
site and UK-facing Casinotopsonline –
he says that GIG can monetise traffic
twice by sending players to brands on the
GIG-owned iGaming Cloud platform.
“This means they could potentially spend
more on traffic as they are getting a higher
player value,” he says.
The price of entry into the affiliate M&A
Meanwhile the new chairman of Raketech
(which has completed three deals in as
many months for undisclosed sums)
Christian Lundberg said when he joined
in June that his company will “continue
to pursue our acquisitive agenda”.
Lastly, there are almost certainly going
to be more deals in the offing from Catena
Media given it is yet to exhaust its funding.
As Gillespie says: “The operational,
financial and strategic rationale for
affiliate M&A all check out. There is
no end in sight.”
SCOTT LONGLEY has
been a journalist since the
early noughties covering
personal finance, sport and
gambling. He has worked
for a number of publications
including Investor’s Week, Bloomberg
Money, Football First, eGaming Review
and Gambling Compliance. He now
runs his own editorial consultancy,
Clear Concise Media, and writes for a
number of online and print titles.
iGB Affiliate Issue 64 AUG/SEP 2017
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