While the gambling market in the United States has slowed down due to the extensive legislation against online gambling and online poker, other parts of the world have shown a keen interest in gambling. Europe and Asia in particular have shown tremendous growth and there is still a large market share that needs to be captured.
With this in mind, Playtech a UK based company recently confirmed that it has gone ahead with the acquisition of PokerStrategy, a super-affiliate company. While Playtech is yet to disclose all the details about the acquisition, it did confirm that it completed a “bolt-on acquisition” for around USD $50m, which is about €38.3 million Euros.
While the acquisition will result in a change of strategy and marketing overall, the founders of PokerStrategy, Dominik Kofert and Enrique Guzmán will continue to work in the company on a consulting role. Both founders have committed to fulfill all of PokerStrategy’s current financial obligations and have given their personal guarantees to ensure that nothing remains outstanding. The CEO Damian Sokol and COO Pavel Stehno will remain in their current positions to ensure a smooth transition and operational process.
There are a number of reasons as to why Playtech went ahead with this acquisition and released a statement to the public to confirm its new plans. In a release, Playtech confirmed
The acquisition will allow Playtech to further diversify its business by providing licensees with access to the world’s largest independent poker community with over six million members, thereby cementing existing relationships and creating incremental opportunities for both software and PTTS marketing.
The affiliate marketing business has declined to a certain extent during the past few years. This is especially true in the poker niche, because most website tend to withdraw from discriminatory rakeback models. This is probably one of the reasons as to why PokerStrategy has lost two big clients during the last 12 months, one of them being bwin.party.
Nevertheless, Playtech is all set to advance further with this acquisition and has done extremely well to make the purchase for €38.3 million. Based on reports released, PokerStrategy’s 2012 pre-tax profits were estimated to be around €19.5 million, along with net assets that came up to €16.3 million. If we consider 2x earnings multiple, then the price Playtech has paid for the acquisition is more than reasonable. Even if one deems most of PokerStrategy’s assets to be “intangibles,” Playtech has still done extremely well in closing the deal.