Analysis: The business of buying into B2B

There has always been hype around the value of building one’s own platform versus tacking on a third-party technology offering. But as the gaming industry matures at a rapid pace, some operators at a stagnant point in their growth are considering ways to boost their technologies without resigning to a complete overhaul of their platform.

This is where the now seemingly popular move to acquire new platform technology comes in, particularly in the B2B space. The gaming sphere has been rife with movement in this space of late, not least with French operator FDJ acquiring Sporting Solutions, Aspire Global taking on Pariplay, and the hotly discussed rumour that DraftKings may well be buying SBTech.

There are a myriad of reasons why an operator might think to branch out into the B2B space. Not least for the opportunity to open up new revenue streams – a golden opportunity in some of the markets that are clamping down on regulation and causing the pool of B2C offerings to shrink and the least compliant players being pushed out.

Another point may of course be to gain access to certain markets, which, in the case of DraftKings and SBTech, seems a likely reason for the possible takeover. But these types of deals throw up a lot of questions when considering the actual technology in question. Will the B2B product sit apart from the B2C technology? Will the operator decide to integrate their platform into the newly acquired one and scrap any third-party system they might be using?

Under pressure

Each case is different, and as technology consultant and partner at Propus PartnersMark Israney points out, all platforms will have their pros and cons, and many companies will come with skeletons in their closet.

“If you were creating the perfect platform, you could steal bits from each and then a few from your proprietary technology,” Israney tells EGR Technology. “So perhaps, for somebody with the scope and scale of a tier-one operator, the value [of acquiring SBTech, for example] is that you’ve already got 70% of the technology and it’s actually cheaper to buy the other 30%.”

CEO of B2C and B2B company Aspire Global, Tsachi Maimon, agrees, adding: “Operators are under a lot of stress because of the many regulations and profit margins going down. This is why they are looking to scale up, and a good way of scaling is having your B2B arm or technology.”

Aspire acquired online gaming and lottery provider Pariplay in June for £11.7m. The majority of Aspire’s revenues stem from its B2B arm and in a move to leverage that revenue stream, Maimon says: “We were looking to have a grip on more pieces in the industry’s value chain. There are a lot of games suppliers out there, so big operators will do less and less direct integrations with [third-party] suppliers and will aim to do it through an aggregator [instead]. Pariplay is one of those potential aggregators.”

In Aspire’s case, the Pariplay technology will sit apart from its current platform as a standalone business. “Not many challenges there,” Maimon admits. Although an easy ride is not the norm for this industry. A look back on the bwin.party merger of 2011 offers a clear perspective into the challenges companies can face, especially when too much focus is placed on the integration and not enough is put into product development.

Group director for M&A at the time, Nigel Birrell recalls the shift of bwin verticals onto the party platform taking up more time than expected, causing the company to lose sight of current innovations in the betting and gaming world.

“When we came out of the purdah of the technical integration, we were a year behind everybody else in terms of mobile, sports, live betting and areas like that,” Birrell adds.

On the industry’s continued shift towards B2B M&A, Birrell says: “I’m not sure these challenges are always there, it depends on the size of the integration and some of these B2B acquisitions may not even be integrated but operators may be using them as a tool or a product effectively to sell to third parties. So it may well be you don’t need to integrate them.”

Reflecting on his time at bwin.party, Birrell also recalls the acquisition of small Ukrainian social games developer Orneon. The operator considered the supplier a valuable asset for its vast technical knowledge and skillset and Birrell insists small B2B acquisitions are often based on a strategic effort to improve a group’s skills.

“Having multiple technological functions and skillsets is useful. The only problem we had then was they were so good everybody wanted to use them rather than our main Indian function, so we had to prioritise what would go to them and what our main function would carry out,” he notes.

Grand Parade

It was a similar situation for William Hill’s takeover of gaming technology specialist Grand Parade in 2016. The firm’s expertise in front-end functions and user experience proved invaluable and the team now develops the front-end of all Hills’ sites and apps from its Krakow hub. Back in March, Grand Parade’s head of architecture Ciprian Negrila told EGR Technology the consolidation of Grand Parade into Hills had largely been a smooth ride and relied heavily on the exchange of knowledge between the two companies.

“It’s been two-and-a-half years already and in this time people were always comfortable with everything going on. We leveraged the knowledge and systems of both sides to make the best of both technologies. The results are, we now have a very stable platform for our customers while achieving radical improvements in the way we do everything,” he said.

Buy buy Miss American Pie

In the case of the US, where the hotly rumoured DraftKings-SBTech tie-up continues to pique the interest of many and behind the scenes, major gambling operations are considering their own M&A route to expansion into the online betting world, data is playing a leading role, and sports betting suppliers may have the key to improving the integration of multiple data feeds into operators’ trading systems.

Propus Partners’ Israney comments: “The ability to take in multiple data feeds which are real-time, if not quicker, from multiple suppliers, push them together and push out to the customer in a single path, is a lot more difficult than they thought, and I think they’re starting to realise just how sophisticated punters in the US, and elsewhere, will become.

“Technical schematic diagrams for data feeds, when you put trading over the top of it, is incredibly complex and a reasonably sized B2B supplier will have 10, 15 or 20 different data feeds. I can imagine that if you’re coming into this world with very linear or self-built data, then the integration points for that must be mind-blowing. So, a firm that has already done the heavy lifting for these data feeds might be beneficial because it will cost twice as much to build it in-house,” he adds.

The reality is, major players are growing out of relying on third-party providers. Sure, the US is still an extremely nascent market and these partnerships have been crucial in gaining quick access into the jurisdiction. But is it now time to consider bringing the entire technology cycle in-house?