Can you avoid the sharks in 'consolidation'?
Can you avoid the sharks in 'consolidation'?
Consolidation is the buzz word in the betting and gaming industry, but companies must ask a number of crucial questions before deciding whether they have found the right partner, according to Mickey Charles.
News of the latest big-name merger emerged this week, with Paddy Power and Betfair set to come together to create the world’s largest online gambling company.
However, Charles, who will spearhead an open floor debate on consolidation at EiG 2015 in October, believes there are plenty of questions for gaming industry stakeholders to ask about the M&A trend within an evolving sector.
“Do you have an exit strategy? If so, is it time? If not, are you entertaining offers? Are you looking at consolidation or takeover? There’s a major difference,” the former president and CEO of The Sports Network, told TotallyGaming.com.
“With consolidation, does that make you a more formidable force? Do you anticipate any conflicts in thinking, and who will be at the wheel of the new ship? What happens to your staff if you were approached, or to both sets of staff if it is truly mutual thinking?
“Has either party defined consolidation with acceptable preparation to put into writing? Are there obvious things being done by either party, from technical to marketing, that are not being done by the other or is it just elimination of the obvious competition and increasing earnings or revenue by adding same to either of the parties' bottom line?
“Are the big boys about to take the smaller ones out of the market? Has growth, pragmatically, been stymied and is it, reasonably, time to fold up your tents and move them to another locale? How much difference is there, realistically, between the two discussing consolidation?
“The best situation is someone seeking to grow in the industry and not doing most of what you do currently.”
The apparent surge for consolidation appears to be gathering momentum within the industry, and, aside from the fact that “dollars are appealing”, Charles believes there are a number of reasons for the shift.
“There is a growing trend of larger players and companies entering the world of gaming with resources many of the smaller ones do not have, thereby making ‘consolidation’ with them very enticing – and intelligent if the numbers are right,” he added.
“Gaming is no different to other industries. ‘A’ offers ‘consolidation’ to ‘B’, but it is not really a marriage with shared responsibilities – it is one of assigned responsibilities.
“Many no longer want the current hand-to-hand combat that exists in the industry. That opens the doors for folks preaching consolidation, but thinking takeover.”
There has been concern expressed in some quarters that consolidation can stifle independent operators and innovators. However, Charles does not necessarily think that is the case.
“It does not stifle unless size makes replication an easy task and then marketing dollars take over,” he said.
“If independent operators can establish a position, however small, and display ideas, technology and profit at their level with limited dollars, then the larger operators come in with dollars, pounds or euros in tow.
“It can enhance what is available for the players.”
Looking to the future, Charles does predict “fewer and fewer companies, players and providers of note and a competitive level that maintains some acceptable degree of fairness”.
He added: “For too many it is a matter of being able to stay in the game when the rich get richer, more innovative, spending money on marketing like it is going out of style and having a seeming disregard for what it takes to ‘consolidate’ competition out of the picture.
“Consolidation that does not focus on elimination is the formula that will be the one to lead a company to the head of the parade.
“Will there be some casualties? Of course, but it is the same as being in a war. It’s a shame, without question, but the eternal discriminating and deciding factor is, did you win?”
Given the fluid nature of the industry, with major mergers being discussed and reported on an almost weekly basis, Charles acknowledges there are significant challenges facing the larger as well as smaller parties.
“Bigger has to become bigger over and over,” he said. “Smaller has to find a ‘consolidating’ group that they can accept and be protected in the process. Or they need to create a technology, device or product that establishes a niche no one has that results in an income that works and stands firmly on the adage that ‘it is cheaper and wiser to licence from me than to attempt to compete with me – win-win’.
“You must be able to take the money and run, never look back, seize upon a new area of interest or, if at all possible, position yourself in the consolidating process to suffer as few people losses as possible, retain a corporate dignity and voice, see growth that is a true result of consolidation, and a future that exemplifies most of what you were thinking of accomplishing on a grander scale anyway.
“Just watch out for the sharks! They swim up smiling, leave burping and licking their lips.”
About Mickey Charles LLC
While an attorney by training, Mickey's background includes a wide range of interests among which are newspaper syndication, hosting a national sports talk show, being a feature editor on a myriad of topics running the gamut from telecommunications to travel, responding to requests as panelist, moderator and chair-person at seminars, conventions, trade shows and conferences...and was President and CEO of Computer Information Network, Inc., known within the industry and world-wide as The Sports Network, which was recently acquired by another organization within the industry.
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