The online gambling sector has been very active of late. On the corporate side, we are starting to see the long-predicted wave of M&A activity. The market drivers are there for all to see: declining growth rates, increased regulation, higher marketing costs and taxation pressures all point to the need to increase scale or diversify into other verticals. The current wave effectively kicked off with Canadian-listed Intertain Group Limited acquiring Jackpotjoy and other brands from Gamesys Limited for c. £425m, on which we acted as UK counsel for Intertain.
At the recent KPMG eGaming Summit in Gibraltar, Susan Breen, Partner and Head of Mishcon's Betting & Gaming Group, chaired an M&A panel of industry veterans which looked at M&A prospects for some of the industry's biggest players. Further momentum was seen this week as competing bidders emerged for one of the London Stock Exchange's most established online operators, bwin.party digital entertainment plc. Many operators are assessing the merits of some form of consolidation whether for offensive or defensive reasons.
As the sector pins its growth plans on scaling up and synergies, operators should conduct reviews of all key legal, regulatory and financial issues affecting their business.
On the regulatory side, the UK Gambling Commission has recently brought into effect its new Licence Conditions and Codes of Practice. Stuart McMaster highlighted that these have been updated to include a series of new social responsibility features (such as the requirement to adopt policies to identify at-risk customers, and new rules regarding the advertising of 'free bet' offers). Further social responsibility measures are on their way, with fine-tuning currently taking place in relation to a new self-exclusion scheme (to enable consumers to block themselves from being able to gamble with any UK-licensed online operator).
Tax continues to be a key focus for online operators in Europe, with VAT currently being a major concern. The EU brought in a new VAT Directive at the start of the year, but individual member states are treating online gambling in different ways, with many operators concerned that they may be forced to fight what they regard as the imposition of unlawful (and significant) tax charges on their activities.
The impact of the proposed diverted profits tax (aka Google tax) has provoked much comment with operators starting to look at operational changes which may lead to vertical fragmentation within the industry.
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Partner, Head of Betting & Gaming