Part 1 : The UK market – a split screen
Rank
The company has achieved the difficult task of transferring to a new platform , provided by Bede , and is starting to see the benefit . Total digital revenue rose 19 % over the period , with the Grosvenor casino online business up 34 % and Mecca up 11 %. The company was at the centre of one of the more audacious M & A bids in recent years when it teamed up with 888 to put together merger terms with William Hill .
The M & A debate
Significantly , all of the chasing pack have either already been directly involved in consolidation within the gambling sector , taken part in failed discussions or are rumoured to have been in talks about further deals . ( At the time of writing , for instance , William Hill has just confirmed it has conducted early-stage discussions with Australia ’ s CrownBet regarding a potential merger of operations .)
Just as significant , perhaps , is that the top two in the market have yet to take any part in the process to date . This is not a coincidence . One of the obvious points about M & A – and certainly a factor in why M & A is often seen after the fact to have been value destructive – is the disruption caused .
Part of the logic of M & A is cost synergies , which inevitably means job cuts . Soon after the completion of the Paddy Power Betfair merger , for instance , the company announced around 650 job losses across both headquarters in Dublin and London . Although we didn ’ t see the headline numbers for Ladbrokes Coral , the nature of what was termed a “ blue takeover ” and the shift to a single UK HQ in east London is known to have led to a substantial number of mainly Ladbrokes personnel leaving after the deal completed .
Rationalisation has a cost in terms of morale – at least in the short term – and the recent performance of Paddy Power Betfair and the Ladbrokes brand would appear to bear testimony to that notion .
Operationally , it also has an effect . Time spent across all levels on integration efforts means focus can be lost on getting the basics right . Platform issues take up valuable development time and budget . M & A is not known as being a driver of innovation — good ideas get swamped out as organisations gain scale .
Scale , of course , is one of the main drivers of consolidation and its value has been cited by various figures across the industry . In the Paddy Power Betfair 2016 annual report , chairman Gary McCann began his introduction by stating that the merger had brought together “ two very successful businesses creating a world-class operator with substantial scale and capabilities that leave us well-placed to serve our customers and attract and retain top-quality employees .”
In the prospectus for Ladbrokes Coral , meanwhile , the company stated that the increases in scale that had occurred recently were expected to make investments in technology and marketing “ more affordable ”.
“ In addition , larger betting and gaming operators are expected to be better equipped to understand the increasingly extensive and complex regulatory and licensing requirements that they face and to absorb the impact of any adverse changes in regulation , taxation and / or levies ,” the company said .
Across sectors — and not just in the gambling world — there is a belief among management teams and their advisers in the logic of the numbers alone , that a combined entity ’ s bottom line will be more than the sum of its parts .
This is certainly true in some cases . GVC is the most obvious example in terms of B2C : successive M & A deals have catapulted the company from being a marginal player to one of the leading consolidators .
Going by the newspaper reports circulating in the summer , GVC hopes to play a further role in future potential combinations via a tie-up with Ladbrokes Coral . Such a deal would further cement GVC chief executive Kenny Alexander ’ s reputation as the king of the dealmakers , although it would mark a step change in his company ’ s progress to date .
iGaming Business Market Monitor • December 2017 7