Surge of growth online
The gaming industry in the UK has seen an unprecedented number of big deals by major players this summer. According to the BBC News, the industry is in a “mergers and acquisitions frenzy.”
In July, Ladbrokes and Gala Coral completed a £2.3 billion (US$3.5 billion) deal, followed by the £6 billion (US$9.1 billion) merger of Betfair and Paddy Power in August, and GVC’s £1.1 billion acquisition of Bwin.party in September.
“On the one hand, they are seeing the costs of tax, compliance and technology go up and want to offset this,” said Peel Hunt analyst Nick Batram. “But they are also looking for new ways to grow as the market becomes more competitive.”
According to figures from the UK Gambling Commission, revenues soared from £5.6 billion in 2010 to £7.1 billion in 2014, but the bulk of that growth occurred online. That leaves land-based operators to struggle with a tougher regulatory environment.
“You have new restrictions placed on people who want to stake more than £50 a spin on machines,” said Batram. “Furthermore, machine gaming duties now stand at up to 25 percent. And buying land-based assets is quite expensive anyway, because you have bricks and mortar.”
Those factors may have prompted the merger of Ladbrokes and Gala Coral in a deal that created the UK’s largest bookmaker with some 4,000 high street betting shops. Joining forces could lead to an estimated £65 million of cost efficiencies for the new firm, BBC reported.
The UK government is also cracking down on gambling websites, said Mark Jordan of the accounting firm PWC. “Previously if I was headquartered in Gibraltar offering online betting to someone in the UK, that would be tax-free, whereas now there is a point of consumption tax which is levied by HMRC at 15 percent,” he said.
“Gone are the days when you could just sling up an online casino and watch the money roll in,” observed Batram. “The online market is much more competitive, so your site has to feel right, look right—and that costs money.”
