Talks on the acquisition of European bookmaker William Hill began towards the end of summer 2020. This was when Caesars Entertainment Inc. made an announcement that it intended to buy William Hill PLC for £2.9 billion. Less than two years later, 888 shareholders held a meeting to vote on the decision to acquire the non-US assets of the UK gambling company from Caesars.
Following much deliberation, the online gambling operator 888 finally closed the deal, sealing its acquisition of William Hill’s non-US assets from Caesars for $2.35 billion. The new management even took the initiative to announce the brand’s new leadership team.
With mergers and acquisitions in the gambling market happening daily, where will this trend lead? Punters at some of the best gambling sites are concerned that the trend might result in monopolization of oddsmakers. Should they be worried?
An Overview of the Acquisition
In September 2021, 888 initially agreed to acquire William Hill’s non-US business. This came shortly after Caesars acquired the whole net business of William Hill for circa £2.90 billion, with an intention to dispose of all of Hill’s assets, except for US assets.
The original purchase price for the non-US business was £2.2 billion, but Caesars and 888 came to an agreement to lower the price by £250 million. This saw the cash part of the deal reduced from £834.9 million to £584.9 million.
888 is thought to have secured the bargain after leveraging the fact that William Hill’s business license to operate in Great Britain was under review. Following shareholders’ approval, the deal was closed on the 1st of July 2022.
What’s the Impact of the Acquisition?
“I am delighted to announce the completion of our acquisition of William Hill. We have gathered the top talents to create an outstanding leadership team that combines strengths from both businesses.
When looking into the future, the blending of our products, content leadership, and state-of-the-art proprietary technologies, these two world-class brands will offer a powerful platform for positive growth,” noted Itai Pazner, 888 Chair.
888’s chair Lord Mendelsohn, also noted that the combined business will amount to becoming the world’s biggest online gambling operator. The fresh group generated a record revenue of $2.68 billion in 2021, a year that saw a net loss of $368.5 million.
A combination of the duo brings together two of the top leaders in the online gambling market to create a powerful global iGaming giant. Mendelsohn also believes that the acquisition will create significant value for 888’s shareholders by creating an expanded business with novel technology, as well as brands and products across gaming and sports betting.
With an exceptional and top-quality management team formed from great and seasoned talents from both businesses, the new group sets to take the global iGaming market by storm.
The Dawn of Monopolization of Oddsmakers
The sports betting and iGaming industry is in the midst of a seismic shift where the market is getting dominated by large players. These industry sharks keep gaining more power through the acquisition of smaller bookmakers.
Over the past decade, the global sports betting and gaming markets were characterized by equal growth and consolidations. However, the revenue of the top few big companies almost tripled due to growth of the industry in general and 80% due to the increasing concentration by buying smaller rivals.
Apart from the recent acquisition of William Hill by Caesars and later 888, Barstool Sports backer Penn National Gaming Inc. acquired Score Media & Gaming Inc in August 2021 for $1.74 billion. DraftKings also closed a deal to buy Golden Nugget Online Gaming Inc. the same year for $1.56 billion.
This trend caused some concerns among consumers, most fearing that it will result in the monopolization of oddsmakers.
Where Does the History of Monopolization Begin?
There are several historical parallels for what is happening in the modern-day gaming and gambling industry. In the early 20th century, the sportsbooks business in the United States of America was strictly local.
Before the lifting of the prohibition in 1933, the illegal enterprises that the law had created had to find a new source of revenue, often turning to gambling, drugs, and prostitution. Following a sequence of about two decades or so, local bookmaking paved the way for a single national organization, quoting a united front of the “Vegas line”.
It was this move that saw local bookmakers become franchisee order takers. This changed the odds-making business entirely. Local sportsbooks offered quoted odds like 3-to-1 on an underdog and bore the risk.
The criminal interests soon shifted focus to point spreads which were invented by Charles McNeil (A mathematician at the University of Chicago) in 1940.
A majority of the wagers were even money (minus a spread known as “Vigorish”), but if you wagered on the underdog, it would result in the spread points being added. However, if you bet on a favorite, the spread points were subtracted.
Organized crime would match bets on both sides such that it made equal profits on all possible outcomes. This system lasted for well over four decades until the federal prosecutors broke the monopolized oddsmakers system.
Back to the Present-Day Dawn of Monopolization
Sports betting is a market with vast economies of scale. The conglomeration of sportsbooks, often through mergers and acquisitions, means a bigger organization with enhanced abilities to balance risks and diversify from unbalanced risks.
This organization allows the operators better focus on the lifetime value of consumers instead of focusing on competing in a commoditized market characterized by bets soliciting. Only the largest gambling companies possess the legal, lobbying, and financial resources necessary to satisfy regulators.
In a centralized industry, innovations developed in one part of the global market can easily, rapidly, and efficiently be scaled up for application in the entire market. By taking a closer look at the top global industry competitors, you will realize that they are all combinations of traditional sportsbooks.
Some good examples are UK’s Paddy Power or Golden Nugget with technology innovators such as DraftKings and Betfair. Betfair and Paddy Power are both owned by Flutter Entertainment PLC, which merged all its US business with FanDuel in 2018.
Not a single standalone company of any type has broken through to become a major industry player. This only happens through mergers and acquisitions, such as with the William Hill purchase.
