US, Brazil Or Bust For Affiliates

November 12, 2021
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Instead of leaning on eye-catching revenue predictions, affiliates now need to be active in either the Latin American or US markets if they want to be attractive acquisition assets, sector executives have said.

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Instead of leaning on eye-catching revenue predictions, affiliates now need to be active in either the Latin American or US markets if they want to be attractive acquisition assets, sector executives have said.

A panel of affiliates and market advisors at Thursday’s Betting on Sport Europe conference in London explained that the changing affiliate mergers and acquisitions (M&A) landscape has made it harder for many businesses to get snapped up, or even noticed.

Jurisdictions with huge growth potential are vital for affiliates to cover, as companies purchasing affiliates move their strategies away from focusing on EBITDA multiples to more complex models, according to the panel.

Gary Gillies, Affiliate Acroud’s head of betting, said the likes of Better Collective and Catena Media, who for a long time dominated the affiliate M&A market, are now focusing on factors such as what affiliates could earn in the future and in what jurisdictions they are active.

This change in focus requires affiliates to stay ahead of the regulatory curve, according to Gillies, to position themselves as attractable assets to market incumbents.

This means the next great opportunity for affiliates outside of the US is “100 percent Brazil”, Gillies said.

“People used to laugh at me when I said Brazil would regulate, now everyone is looking to acquire there and places like Colombia, Argentina, and Ecuador. You can see traffic to websites there is increasing. It's the same story in Asia, but it's very easy entering LatAm,” Gillies said.

The rest of the panel agreed that Latin America was the most attractive region for affiliates and confirmed compliance and language barriers made Asian market entry far harder.

If you are not in the US or Brazil “you are missing out on huge growth prospects”, according to Lee Gwilliam, Gambling.com’s vice president of operations and casinos.

Similar comments about the importance of the Brazilian market to affiliates were made on a separate panel a day earlier by Marcos Oliveira of Clever Advertising.

Brazil passed legislation to allow for fixed-odds sports betting in 2018, but has taken longer than expected to implement secondary legislation and starting a licensing process. With football's Qatar World Cup 2022 looming, officials have said they are pushing for progress in the next few months.

“We'll always looking to markets that make the most sense in long-term investments, but we will not jump focus from the US,” Gwilliam said.

In the US, different affiliate businesses are now looking attractive to investors, according to Gwilliam, especially when they display an understanding of being on top of developing regulations.

“Types of affiliates that have big branding potential, valuable tech assets or even large amounts of staff are all being looked into now,” as opposed to just EBITDA multiples, Gwilliam said.

Matthew Smith, director of capital markets at consultancy Arkur Capital, said from an advisory point of view, it has become much harder for smaller affiliates to compete.

If affiliates can establish themselves and prove they can bring value to incumbents then they will be “valuable assets” and many affiliates have left the sector, which will continue to lead to more M&A and market consolidation, according to Smith.

“Lots of US-based affiliates and investors will still be looking if they can leverage off European business to launch expansions,” Smith added.

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