TLDR
- BDO director Ollie Woodward says UK gambling operators feel “resilience and bullishness” despite pressure from the tax hike.
- The April Remote Gambling Duty increase pushed operators to review their cost base and staffing.
- Entain announced job cuts affecting up to 500 roles, but says the move is not tied to the tax hike.
- Bally’s Intralot acquired Evoke to expand its presence in Europe after the tax change.
- BDO says regulated revenue now attracts higher value in gambling deals than unregulated revenue.
UK gambling operators are rethinking their costs and looking at possible deals after the April Remote Gambling Duty increase. That’s according to Ollie Woodward, a corporate finance director at BDO.
Woodward spoke to iGB during iGB Live’s first M&A Summit in July. He said operators are focused on the sustainability of their player base.
Entain announced a restructuring last week. The plan could cut up to 500 roles worldwide. The company said the changes are not a response to the UK tax increase.
Other companies see the tax hike differently. Bally’s Intralot bought Evoke after that company faced struggles tied partly to the tax change.
Bally’s Intralot CEO Robeson Reeves told analysts in April that the deal would support the company’s growth plans in Europe.
Woodward said these kinds of restructuring and deal talks are now a top priority for many operators. He said this topic makes up a large part of BDO’s current gaming deal work.
Operators Look at People and Technology
Woodward said the tax hike arrived at a time when many businesses were already reviewing their costs using artificial intelligence tools.
He said larger, established operators are looking closely at staffing and technology. They want to find ways to improve their profit margins.
BDO’s M&A team is currently working with about five or six UK gambling businesses on large deal processes. This spans online betting, land-based venues, and suppliers.
Some operators are looking at markets outside the UK for growth. Woodward pointed to Canada, where the province of Alberta is opening its online betting market.
Player Cohorts and Regulated Revenue
Woodward said understanding how player groups change over the next year is a key focus for operators.
This includes looking at return-to-player rates, along with marketing spend and strategy. He said it comes down to how sustainable earnings and player numbers are over time.
Despite the tighter margins from the tax hike, Woodward said the overall mood among BDO’s clients remains positive.
Reporting regulated versus unregulated revenue has become a bigger focus in gambling deals, Woodward said. Buyers increasingly want businesses with fully regulated operations.
Companies like Bet365 and Yolo Group have been exiting or scaling back unregulated markets over the past year.
Woodward said the first question in a deal process is often whether a company can legally separate its regulated and unregulated operations. He said many businesses don’t yet track this data at a detailed enough level to split it easily.
Regulated revenue is now seen as more valuable, Woodward said. It’s easier to sell and often draws higher offers. Many large operators are moving toward being fully or mostly regulated.
Having unregulated revenue in a company’s past doesn’t automatically hurt its reputation, Woodward said. It depends on the type of market involved and the timing of any licence applications.
Woodward said buyers want to understand what choices management made at the time. They look at whether a company operated in a grey market before regulation and then applied for a licence once rules were introduced.
