After failing to acquire retail forex brokers Plus500 Ltd (LON:PLUS) and AvaTrade late last year in deals which would have totaled more than $800 million, online gaming and forex giant Playtech PLC (LON:PTEC) is apparently returning its M&A appetite to its core business of online gaming platforms and the possible acquisition of rival OpenBet.
Owned by mid-market private equity firm Vitruvian Partners, OpenBet is reportedly on the block and has retained Morgan Stanley as investment banking adviser to coordinate the possible sale of the company. Vitruvian acquired OpenBet from Rupert Murdoch’s NDS in 2011 for £208 million (then about USD $331 million), and is looking to make a return of about 40-50% on its investment, meaning that it is looking for a sale price in the £300 million range ($430 million).
OpenBet is one of Playtech’s main rivals in providing software platforms for online sports betting, casino games, and lotteries. It has had some success lately in signing / re-signing big-time clients such as Ladbrokes, Sky Betting, William Hill and Paddy Power. And it appears as though Playtech’s main competition for OpenBet will be OpenBet’s existing clients, namely William Hill and Paddy Power, which itself is in process of completing its merger with Betfair.
So what does this mean for Playtech’s Forex business, and its obvious desire to acquire its way to a leadership position in the retail forex sector?
Were Playtech to be the eventual suitor for OpenBet, it likely means that Playtech’s forex expansion plans may have to take a back seat for a while. Playtech does have plenty of M&A firepower available as its simultaneous bids last year for Plus500 and AvaTrade demonstrated, with cash balnaces topping £780 million ($1.1 billion) as at June 30, 2015. However digesting the acquisition of a key rival in its core business such as OpenBet would probably take a good amount of time and management attention.
In any event, Playtech’s M&A opportunities in the Forex space may be limited to companies outside the UK (and Ireland), as it appears that the financial regulators in those countries are unlikely to allow Playtech to acquire regulated financial companies. Playtech’s current entrant in retail forex, Markets.com, is based in Cyprus and is regulated there by CySEC. Playtech may need to look at other Cyprus forex brokers (good news – there are many), or brokers based in other jurisdictions such as Australia or Hong Kong.