Beyond the Stars: Rafi Ashkenazi on achievements and missed opportunities at The Stars Group

The £10bn mega-merger between The Stars Group (TSG) and Flutter Entertainment is perhaps one of the most compelling and interesting stories to emerge from the gambling industry in recent years. Bringing together a pantheon of well-known, diverse and well-respected brands and businesses, the move created what is effectively the first gambling superpower.

In tandem with the headline-grabbing, hyperbolic stories which have arisen from the combination in the months since, there are human stories which remain largely unseen and unheard. One such is the story of former TSG CEO Rafi Ashkenazi, a man who lived and breathed TSG for over seven years, leaving an indelible footprint on the business and indeed the wider industry, in having laid the foundations for the Flutter acquisition.

As anyone who plays such an integral role can tell you, moving onto pastures new is always tough, even more so in handing that business over to external hands. “From my perspective, it was definitely sad. I became quite emotional on the last day before the business was fully acquired and all the regulatory approvals came in,” the 46-year-old explains.

“I had a very emotional discussion with the board, and I had quite an emotional discussion with some of the people on my executive committee team and my management team. I’ve been engaged with many people within the hierarchy of the business. I’ve been close to developers, marketing professionals, legal and finance people. I was engaged with so many elements of the business that parting wasn’t easy.”

Expanding on the relationships forged over his tenure, Ashkenazi cites the presence of common goals around a common vision as bringing him closer to people that started as employees, but later became firm friends. “I managed to build this great dynamic and friendship with many of them, acting as a mentor to a few people in the company, so it’s not that easy to hand over and move on.

“Of course, it was very emotional. I posted a comment on LinkedIn and I also posted an internal video to the company. I was almost in tears when I was posting this video, and looking at it later on, I said, ‘Oh my god, this is like way too emotional’ but it came from the heart,” he adds.

Back to the Future

In order to understand the man behind the emotion, you must first understand the backstory behind Ashkenazi’s long-time involvement with TSG. His journey with the business began in 2013, when he moved from being COO of Playtech to become COO of what was then the Rational Group. However, as he explains, stepping up to the top job was always part of the plan.

“The COO role at PokerStars was very much a semi-CEO role anyway because I was managing 1,500 out of the 1,600 people in the company. Other than the legal team and the finance team, I was managing everything else so I was quite ready to take on the CEO role,” Ashkenazi reveals.

“To be honest, I was quite ready to take on the CEO role when I left Playtech; it was one of the reasons I left in that I felt, after more than seven years in Playtech, I was pretty much ready to be able to run a company myself. That was the reason for me joining PokerStars at the time. I had formed a vision in my mind that I wanted to lead and [PokerStars founders] Mark and Isai [Scheinberg] allowed me to live it during the time they were still there,” he adds.

After two years in the role, an audacious $4.9bn acquisition of Rational Group by Amaya, and a brief seven-month stint as SVP of the Amaya brand, Ashkenazi got his wish when then-TSG CEO David Baazov was implicated by Canadian regulators in multiple securities fraud charges. Baazov exited what was the world’s largest publicly traded online gambling company in August 2016 to be replaced by Ashkenazi, firstly as interim CEO in March, but then on a permanent basis in November.

The tumult of Baazov’s departure rendered the company leaderless, but Ashkenazi reveals his former boss left no pearls of wisdom on how to run the company. “I worked quite closely with David, [but] it wasn’t that I needed any type of parting advice. I knew his vision, and I had my own vision. Once I took over, I executed on my vision, which was not that dissimilar from the one that David had,” he explains.

Vision quest

Gulliver’s Travels author Jonathan Swift once said vision is “the art of seeing what is invisible to others”, and this maxim is certainly true when it comes to managing a global business and brand.
For Ashkenazi, having a vision would be the cornerstone of his time as TSG CEO, and he reveals that the formative process in shaping that vision began even before he took the top job. “In the first place, I saw a company that was essentially a private company, operating a single brand [PokerStars], using practically a single channel, which was a downloadable desktop app,” he explains.

“There was almost no focus on mobile, most of the revenue we were getting was from grey markets, there was not a lot of M&A and no diversification in the business. Obviously PokerStars being the largest poker platform in the world has one of the most attractive ecosystems out there, so I said to myself this company has a very, very significant future. It has a platform that we can capitalise on and start diversifying to build one of the leading companies in the gaming industries, not just in poker. That was the vision from the very beginning,” he adds.

However, as the old adage goes, getting there is only half the battle, and the former TSG boss highlights numerous challenges in the journey, with TSG being in a “very bad place” when he stepped up. “First of all, we needed to get to financial stability because we were carrying a lot of debt and we also had deferred payment to the Scheinberg family. We needed to execute on the plan and we still needed to have cash in order to run the business and continue to promote the business,” he explains.

“It was essentially a place where it was very hard to operate because you’re locked from so many different angles and you don’t have the cash to execute on your plan. In response, you develop this paranoia as part of it, and you check and double check a lot of stuff,” Ashkenazi adds.

Rafi Ashkenazi said The Stars Group was keen to be the consolidator rather than be consolidated

Indeed, he cannot help but smile when talking about that “healthy paranoia” which characterised his tenure in the top job. “I always tried to look and be ahead of the curve, trying to anticipate what can go wrong in every single element or any type of segment within the business,” he reveals.

“I pushed the guys to really try to think ahead and find or create mitigation plans for potential crises that we will need to deal with.”

The other attribute Ashkenazi points to as being central to his time as CEO is collaboration, which he explains came with its own challenges at a group level.

“It’s more difficult than it sounds to get all the various different segments that we had to really collaborate between them, understanding that the whole was greater than the individual parts, so that’s something that I was driving quite a lot,” Ashkenazi states.

With an ever-expanding number of employees and departments collaborating, and the external pressures of pursuing international diversification mounting, most individuals would naturally experience burnout. Ashkenazi was no exception. “These sorts of things required a lot of extra time and effort, and the more I became involved in multiple different activities, the more it became impossible to operate,” he explains, highlighting the later appointment of Gino Appiotti as TSG international CEO in June 2019 as being something he should have done much earlier.

“I couldn’t be involved in so many different things at the same time. I wasn’t serving my purpose or my role in the company well, so I made the change. It was a very good change and I was very happy to do so,” he adds.

Changing course

After successfully steadying the ship and beginning to pay down the Toronto-listed firm’s debts, Ashkenazi highlights two main areas of attention: technical expansion and, in tandem, an expansion through inorganic M&A. “My philosophy was very clear: we need to continue growing organically. In markets where we don’t have significant presence or in verticals that we don’t have significant presence, we need to think about inorganic growth,” he explains.

“I’m a big believer that you need to build the business in both an organic and inorganic way, it’s just a matter of finding the right balance between the two methods. The question that I raised with my management team is do we want to be the consolidator, or do we want to be consolidated? The answer I got was quite overwhelming: we want to be the consolidator rather than be consolidated.”

Diversification is a natural step in the life of every operator and business, with the recent international lockdowns due to coronavirus highlighting the benefits of a diversified gambling portfolio. TSG’s own journey into diversification, one can argue, inexorably set it on the path to its later acquisition by Flutter by making the business a more attractive takeover prospect. However, for Ashkenazi, diversification away from TSG’s core poker vertical was an eventual necessity due to the inherent limitations of poker in areas including content and innovation.

“We constantly needed to find innovative ways, not just with the product, not only with the game itself, but also with the marketing and some of the sponsors that we’re bringing. It’s very challenging, because you’re the only one essentially who is doing that, no one else is doing any of that,” he explains.

“When you are required to build a category as a company, as we needed to build the poker category, it’s not an easy thing to do. It’s a logical step when you run a business for the long term, you eventually must diversify because you can’t put all your eggs in one basket, which for us was poker,” Ashkenazi adds.

Reflecting on this, he also cites the clear benefit of broadening the operator’s brand appeal, much of which was concentrated on its core PokerStars customer base into other gambling verticals.

“More than 40% of our customers were betting on sports and more than 30% of the customers were playing casino elsewhere. Why wouldn’t we give our customers the ability to enjoy all the types of gaming verticals they are playing elsewhere with us?” he suggests.

This realisation ignited a furious period of behind-the-scenes activity at TSG, with the management team embarking on a series of internal meetings aimed at building a coherent diversification and M&A strategy, which would later have Ashkenazi flying all over the world to conclude deals.

“We identified the goals for any type of M&A, starting with diversification primarily to sports betting, but also around creating a far larger base of fully regulated revenue versus the grey markets that we were in.

“We also focused on creating a platform that would allow us to acquire more companies in the future and realise the synergies in a much, much better way. That was the three central motivations that we were driving, and we drove it quite successfully,” he adds.

Reach for the Sky

TSG embarked on several transactions during Ashkenazi’s tenure as CEO, but two inevitably stick out in his mind, albeit for very different reasons: the acquisition of Sky Betting & Gaming (SBG) in 2018 in a deal worth $4.7bn and the partnership with Fox Sports in May 2019.

The purchase of SBG was perhaps the clearest statement of intent in TSG’s lifespan. It was a deal that made headlines across the world and radically reshaped the global egaming hierarchy. Addressing the deal, Ashkenazi reveals TSG conducted a comprehensive analysis of the UK market, looking at all the big UK sports betting players before settling on SBG as its “number one” priority. However, as he explains, the rationale of pursuing SBG was clear to him from day one.

“Firstly, the media relationship SBG had with the broadcaster, Sky. Secondly, it was the loyalty. I’ve never seen such a degree of loyalty of customers to the Sky Bet brand. It was quite remarkable, something I loved. SBG continued to grow value from its customers over the long term, which was great.

“You couldn’t find that in many gaming companies and some of the dynamics I saw within SBG was completely non-gaming. Some of the KPIs were completely off the charts when you compare it to other gaming companies. It wasn’t just an online company; it was a company that had access to approximately 70% of the gambling population in the UK. That’s a truly remarkable position to be in and there was a very, very talented team within the company,” Ashkenazi adds.

Despite all these reasons, the ex-TSG CEO still cites the acquisition as being a risk because he had “bet it all” on a potential deal regardless of the possible consequences to TSG’s M&A strategy. “I didn’t care about anyone else and that was the one that I was striving towards. Fortunately enough, we managed to acquire them,” he adds.

The Fox on the box

The repeal of PASPA in the US in May 2018 began the biggest gold rush in the history of sports betting. Discussing the immediate aftermath of the ruling, Ashkenazi references his own whistle-stop tour of the US, where potential deals were mooted and ultimately booted due to TSG’s own schedule of M&A, including an aborted deal with FanDuel, which ended up being acquired by Flutter (then Paddy Power Betfair) just days after PASPA was overturned.

“Everything was essentially accelerated. I directed my management team, primarily Robin [Chhabra, chief corporate development offer] and Marlon [Goldstein, chief legal officer] to shift their focus primarily to the US and make sure we were securing our future and position in the US market via either a land-based casino group partnership or a media partnership,” he explains.

For his part, Ashkenazi highlights more of a belief in the potential for a media partnership deal than one with a land-based player, citing the long-term value potential through media as illustrated to TSG by the process to acquire SBG. After long deliberation, TSG partnered with US broadcaster Fox Sports to develop sports betting platforms for the US market under the Fox Bet banner in May 2019, becoming the first major operator to introduce a co-branded sports betting platform. In the 12 months since, international players including GVC, William Hill and even US firms have begun to realise the potential of partnering with media firms, but for Ashkenazi it wasn’t about striking the first blow.

“It wasn’t important for me to sign the first, it was just important to sign the deal I believed in, and the Fox deal was a deal I believed in. We just happened to be the first one to do it,” he explains.
“We saw the benefits of the media relationship through the SBG deal and the firm’s relationship with Sky, so what we planned to do was to replicate this successful concept in other markets, which is what we did with Fox. It was about making the right deal with that philosophy in mind,” Ashkenazi added.

All of a Flutter?

TSG’s diversification into other verticals was a watershed move for the business, but an even bigger moment would come in October 2019 when Flutter Entertainment made its play for the TSG business. Reflecting on the offer, Ashkenazi reveals that two approaches were made, with a third proving “too serious to ignore” for the PokerStars operator, despite its prior aim of being the consolidator rather than the consolidated.

“We are here to continue creating value, it wasn’t something that could be ignored because it was a very logical type of combination. The industry rationale was very strongly presented and explained to us by Flutter – we didn’t really need them to do that because the synergies were quite clear,” he explains.

As part of the integration process between the two heavyweights, Ashkenazi was set to transition from CEO to COO within the combined business, but he later stepped back even further, moving instead to a non-executive director role advising the business on integration issues. Discussing this U-turn, he reveals he agreed to stay as COO only temporarily out of a desire to not leave the business in the lurch, but later left after he realised the firm was in good hands.

“I felt that, from a transition point of view, we had all the components in place and there was no need for me to be in that role anymore. I’m more effective if I act as an adviser to Peter [Jackson, Flutter CEO] and the board,” he explains.

“We had the board all up and running and we had prior members from SBG that moved over to the Flutter board that are there to represent the TSG shareholders’ interests. My feedback wasn’t that necessary because the company had already developed its own dynamic and its own momentum, and there wasn’t really any need for me to be a board member and have this liability on my shoulders for no good reason,” Ashkenazi adds.

One area he is keen to stress is his advice to Flutter on continuing the siloed divisional model Ashkenazi operated during his time as TSG CEO, a course the business pursued in the later separation of Flutter’s UK and international businesses and the creation of an Australian arm. “Separating this segment was absolutely the right thing to do, 100%, no doubt about it because the Australia strategy would be very different from a UK strategy, which would be very different from the US strategy, which would be very different from the international strategy, and so on,” he explains.

A galaxy far, far away

Although Ashkenazi’s tenure as a non-executive director of the Flutter business officially ended in August, he confesses that he’s always available for a call with Flutter’s Jackson, should he need advice. Indeed, he doesn’t rule out a return to what he describes as a “very interesting, dynamic and fast moving” international gambling industry. “It’s everything I love,” he explains. “It represents risk and challenges and strategies and visions. It’s very appealing to be in such a fast-growing type of sector, so I wouldn’t dismiss it, for sure.”

Reflecting on his inevitable legacy at the helm of TSG, Ashkenazi highlights two distinct strands, the first being the creation of a culture of belief in TSG, something which was previously lacking. “We were in quite a bad situation in 2015 before I took over and started to change this mindset, changing the dynamic and the momentum of the business.

“When you are creating momentum within a business, it stays there for a very long time and it’s not that easy to change it, so I would call that my legacy. The second thing I’ve done is to inject courage into the business, making all the moves that we’ve done over the years and I really appreciated the board supporting me, in particular our chair in supporting the business,” he adds.

In the months since stepping back, Ashkenazi has been lending his strategic advice and insight to Blue Ribbon, a B2B marketing business run by long-time friends Amir Askarov and Dan Fischer, as a way of augmenting their business and preparing it for future success. When asked about any advice he would give any prospective CEO given his impressive track record, he draws back on the need to show courage in your approach. “You shouldn’t be afraid to take bold moves because in the long term, if you do it right, it will be very beneficial,” he insists.