The Gaming Realms Sell-off – A Sign of things to Come

The technology market is driven by mergers and acquisitions, with last year seeing a record number of transactions completed. One of the largest saw Mitel and ShoreTel finally merge their operators, with the final deal worth a hefty $530 million.

The online gambling sector sees a particularly high number of deals, thanks to the fluid nature of the marketplace and the potential impact of the UK’s departure from the EU.

This week saw Gaming Realms complete their own transaction, as they sold a hefty chunk of their UK operations to the Norwegian firm River UK Casino. In this post, we’ll appraise the terms of this deal, while asking what it tells us about the current state of the British market.

What were the Terms of the Deal

In terms of the headline number, Gaming Realms have agreed to sell a whopping 70% of their UK casino and B2C business to River UK Casino, for a total fee of £23.1 million.

As a newly incorporated subsidiary of River iGaming, the buyer will pick up a number of prominent Gaming Realms brands, including Pocket Fruity, Britain’s Got Talent Games and Spin Genie. A number of additional, associated businesses are included within the deal, while Gaming Realms will retain control of and several small brand names.

The terms of this deal are interesting, with River UK Casino having essentially entered into a five-year B2B platform and content deal that will generate around £1 million in annual revenue for the group. The cash consideration will comprise a minimum payment of £8.4 million, half of which is payable on completion and the rest concurrent the total earnout sum.

A further £14.7 million has also been laid out on an earnout basis, with the sum to be paid no later than August 31st, 2019.

What Does this Deal Mean for Each Party and the Industry as a Whole?

Ultimately, this represents something of a strategic deal, with Gaming Realms shifting their focus without compromising on the integrity of the business.

According to CEO Patrick Southon, the deal will “be transformational for Gaming Realms and enable the brand to focus more of our resources on international licensing and the development of new gaming content.”

Southon also suggested that this “would put the brand in a stronger position going forward”, particularly in terms of optimising profitability and achieving the optimal level of market growth.

The question that remains is why Gaming Realms have strived to realign their strategy in the current climate? Some have suggested that Brexit has played a key role in the brand’s decision making, with the group committed to extending international licensing and game development in order to penetrate new and more geographically diverse marketplaces around the world.

This would arguably mitigate any revenue declines that occur as a result of Brexit, while helping the brand to plot a new growth course outside of the EU.

It would be wrong to believe that this is the only reason for the deal, however, particularly in a fast-paced and evolutionary market such as this. In fact, such deals can be considered as the lifeblood of the sector, as companies look to thrive in a competitive space and continually refine their proposition to meet the prevailing market conditions.
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