Looking at M&A? Think B2B
An increasing number of operators are now pursuing business-to-business (B2B) acquisitions - and rightly so, says Mervyn Metcalf, managing director of egaming consultancy Global Leisure Partners.
WE CONTINUE TO SEE INCREASED likelihood of corporate transactions through mergers and acquisitions (M&A), with PartyGaming’s buyout of Cashcade and World Poker Tour serving as good lead indicators of future activity.
There are willing sellers in the market and, perhaps more importantly at this stage, serious potential buyers.
We expect to see business-to-business (B2B) consolidation to be the most likely route to near-term M&A activity.
As is always the case with business-to-consumer (B2C) operators, the issue of acquiring other businesses is customer loyalty and determining an accurate price. In fact, the question nearly always arises: how much is a rapidly churning customer base worth?
In contrast, B2B theoretically has technology, longer-term contracted customers and the ability for B2B companies to significantly differentiate themselves on product.
In realising that they cannot get to every player, the likes of PartyGaming, 888 and Bwin have put their weight behind further penetration into the B2B space.
A B2B acquisition strategy is further strengthened when we consider that entry to new markets requires B2C operators to build a brand and a new player base. A B2B operator can simply partner with existing local brands (whether they are in the gaming space or not).
Global Leisure Partners is increasingly asked by its non-gaming clients: “What should we do?” and “with whom?” in the online gaming space.
We believe that in the next 12 to 18 months, we will see strong brands entering online gaming, attracting existing customers and delivering new customers to the space.
B2B providers are a good first point of call.
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