NYX bid for Openbet: preventing Playtech from owning all key verticals?
NYX Gaming's £270m acquisition of Openbet is noteworthy, as is William Hill and Sky Bet's participation in the deal. All parties are adamant the structure will enable Openbet to best serve its clients, while Hills is adamant its stake is not to prevent Playtech taking control of the betting platform. Jake Pollard looks at the issues surrounding the deal.
NYX Gaming’s £270m acquisition of leading sportsbook platform Openbet is noteworthy for its boldness and the way the company partnered with William Hill and Sky Bet. While the two operators have invested £80m and £10m respectively to complete the deal, much of the attention has focused on Hills and its strategy.
This is because as a UK market leader and with a newish chief executive who has overseen the departures of top executives, the operator recently put out a profit warning that has led analysts to cut forecasts by 30%, with further downgrades possible.
With this in mind, it is worth wondering what William Hill’s rationale for investing in Openbet is.
But first NYX. The group will have to use its best diplomatic skills to keep all Openbet clients happy and feeling prioritised when it comes to new releases and platform upgrades.
This, of course, is an issue all the stakeholders discussed at length during the negotiations, says Matt Davey, chief executive of NYX: “William Hill and Sky Bet have invested in NYX because it represented the most attractive structure to all customers.
It maintains the independence of Openbet but more importantly we have agreed with William Hill and Sky Bet that independence remains a key priority for us. They understand that, which is why there will not be board representation for either Hills or Sky Bet. In addition, we held meetings with OpenBet’s key customers to ensure we maintained that level of trust.”
No more uncertainty
In order to ensure it is ‘business as usual’ for Openbet and its clients, the firm will continue to be led and managed by current chief executive Jeremy Thompson-Hill.
Adds Davey: “One of the most attractive elements of OpenBet’s business is indeed its experienced management team, its employees and also its culture. Many acquisitions that we see across the broader technology spectrum aim to strengthen existing product portfolios, leverage distribution networks and materially enhance the overall proposition for the industry. This is demonstrably true of our acquisition of OpenBet.”
If the reasons for William Hill being involved in the deal are not 100% clear (to our eyes at least), for NYX and Davey, “getting the endorsement of two of OpenBet’s larger customers was super important for us. Both Sky Bet and William Hill are also existing customers of NYX so they have a deep understanding of how we manage and operate our business”.
“It’s safe to say that all of OpenBet’s customers have come to rely on their platform and services to maintain a powerful customer experience for their sport betting customers. They can see the importance and opportunity of having a stake in NYX and in preserving technology wherever it makes sense to do so.”
Reading that last quote by Matt Davey, it seems to be saying that Openbet’s other clients, who are also major rivals to William Hill and Sky Bet, should be reassured by the fact that the two groups have a stake in Openbet as it ‘preserves’ the platform’s (and operators’) tech.
The idea that Openbet’s other clients are happier now that the uncertainty over the company’s ownership has been lifted is a fair point, but it still doesn’t explain why William Hill has decided to invest £80m to drive the deal through. William Hill has spoken at length about its technology road map being strengthened by the Openbet deal and having certainty over the direction of this key platform. In essence being in control of a vital component of its business.
Its recent online troubles also mean it must redouble its focus on all things web and mobile; the Openbet deal will assist in that task by making the integration between the back (Openbet) and front ends (Trafalgar) of the site easier.
That is no doubt true, although it does raise the possibility that Hills sees its connection with NYX-Openbet through the prism of privileged access: in other words by being so close to Openbet it can get the best and most bespoke tech and support and maximise the relationship.
The follow on from that theory however has to be that other operators on the platform (i.e. Ladbrokes, Paddy Power etc) would not. Although that is speculation, it is only logical to raise such points.
Sources close to the company and Matt Davey at NYX are categorical that Hills will not get preferential treatment, the involvement of Sky Bet proves that the model will work and Openbet will in fact be able to service them all to the same standard.
Playtech to own all key verticals?
Having all the stakeholders invested (in monetary and professional senses) also means that a more long term view of the platform can be taken, while having one single company owning Openbet was not an alternative Hills and co were willing to contemplate.
Which is where Playtech comes into the picture. It’s well known that the igaming software giant was the other key party looking at acquiring Openbet.
The group is already the dominant casino platform in the space and the idea that it could also own the preeminent sports betting platform, with a client base made up of the likes Ladbrokes, Coral, Paddy Power, Betfair, Betfred and even PMU or Danske Spil; would have rung alarm bells at those companies anxious not to be beholden to Playtech.
Being totally dependent on one single supplier across those two key verticals is not a scenario they would have wanted to envisage.
William Hill has deep knowledge of Playtech and how it works following its 2008 deal with the group and its 2013 acquisition of Playtech’s 29% share of William Hill Online for £420m.
Does it mean it was prepared to do all it could to prevent it acquiring Openbet? It’s impossible to say with any certainty but we can’t be the only ones to have thought of the idea. Bearing that in mind, William Hill’s involvement in the Openbet deal is understandable.
When it comes to corporate strategy however, the company’s recent profit warning and departures of a number of high level executives have led to analyst downgrades and questions being asked about the direction it is taking.
In terms of modus operandi, Hills is also moving away from the model that has served it so well since 2008: leave all the tech to specialists such as Playtech and Openbet; to go for tech-heavy projects such as Trafalgar and now Openbet.
Its plan to go for value punters rather than volume (‘volume to value’) has also been questioned while its wish to have more in-house control over its tech, a project that started with Trafalgar and is now seeing it invest in NYX-Openbet, it has also seen its online capex rise to around £38m from £20m not so long ago.
None of this means Hills is heading in the wrong direction or is doomed to fail, but the steps it is taking do mark a significant change with how it has operated since 2008.
In response Hills will argue that it is mitigating risk and strengthening its technology in a 10-year commercial agreement with NYX that will see it develop its existing sports betting, gaming and retail platforms and a new platform over the next three years. this will enable it to differentiate in a very competitive market and as the UK market leader one hopes it will succeed.
For NYX Gaming meanwhile it’s full steam ahead. “We have two very complementary businesses in technology, content and regulated markets,” says Matt Davey. “The bulk of the deal process is working out how to create a more compelling proposition through the strengths and opportunities of the two entities. The deal will close in mid/end May and between now and then, teams across both businesses will focus on beginning the journey towards that vision.”
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