M&A expert predicts 10 operators will dominate Brazil betting market
Christian Tirabassi, founder and senior partner at M&A advisory firm Ficom Leisure, predicts Brazil’s betting market will be dominated by between 10 and 12 top tier operators, while tier two and threes will struggle to compete with such high barriers to entry.
Brazil’s online market launched on 1 January with 14 full licensees, and subsequent approvals from the Secretariat of Prizes and Bets (SPA) led to around 80 operators operating in the legal market today.
However, although these operators have already met the high barriers for entry, including the BRL30 million ($5.5 million) licence fee, some believe the hefty costs for continued compliance could lead to smaller operators being forced out of the market.
Add to this a potential increase to gambling tax from 12% to 18% of GGR and more advertising restrictions and the market will likely mirror more mature European markets where a handful of the larger players dominate market share.
“The companies that were strong [performers in Brazil] before the regulation are realistically keeping that leadership position,” Tirabassi tells iGB.
“The only one that is a different strategy is the joint venture between MGM and Grupo Globo, which is [new to the market], but the rest are brands that are in continuity, including Betnacional acquired by Flutter.
“The majority of the market will be divided into 10 to 12 operators, which could be 30 brands. The [operators] below a certain threshold of GGR will really struggle [to compete].”
H2 Gambling Capital estimates Brazil’s online betting industry could reach BRL31 billion ($5.5 billion) in GGR in 2025, growing to BRL64 billion in 2030. This is not considering the potential impact of a tax increase.
Regional operators could survive
Despite his belief that larger operators will dominate, Tirabassi suggests smaller competitors could maintain a reasonable market share if they are able to find a niche.
“This could be a regional niche,” Tirabassi continues. “Not to be a national operator, but maybe an operator that has a decent market share in a specific region for whatever reason.
“But the numbers would be much smaller than the ones that go for national market share, like Bet365, Flutter, EstrelaBet, the kind of guys that will make over BRL200-300 million GGR per year.”
Customer acquisition under pressure from new ad measures
With smaller operators expected to struggle due to the cost of doing business in Brazil, recent developments could further turn the screw on such companies.
New ad restrictions banning the use of influencers and athletes and introducing watersheds were approved by the Senate in May. The increased tax rate, which represents a 50% hike from the current rate, will no doubt put even more pressure on operators struggling to compete.
Tirabassi expects over $2.5 billion to be spent on marketing in Brazil over the next 18 months as operators scramble to compete in the new market. Larger operators are expected to make up the bulk of that expenditure as they look to get ahead of incoming ad restrictions.
“We expected there would be some restrictions,” Tirabassi adds. “Before that happens, companies are going to flood the market.
“They will try to get the biggest market share they can. And if and when those restrictions come in, they will [already] have a sizable market share that potentially, they will keep.”
Potential obstacles to M&A activity in Brazil
Tirabassi expects Brazil to become the hottest M&A market in LatAm’s gaming history, which could offer a profitable exit for smaller operators, or enable them to operate within a larger corporation.
Tirabassi advises these independent operators to ensure they have all the necessary corporate requirements in place to facilitate a potential sale. In his experience a lack of corporate structure could lead to problems for operators.
“What we’ve seen is if you have a very large business with a [tiny] corporate structure which is not in line with the size of the business, that’s where [operators] will have to catch up,” says Tirabassi.
“Although they’ve been keeping to the legal requirements and compliance needed [for] the licence, they need to have a CFO and a proper corporate adviser reviewing their numbers, to be ready for due diligence and so on,” he concludes.