Simon French, Bixteth Partners

THE GOOD, THE BAD AND THE UGLY 03/10/19, KPMG eSummit, Isle of Man M&A success and failure

 The Good  Paddy Power-Sportsbet  Betfair-Blue Square  Paddy Power-Betfair   GVC-bwin.party The Ugly   GVC-Sportingbet (ex Australia) Partygaming-Empire Online  Ladbrokes-888  The Bad  William Hill-888  William Hill-Sportingbet (Australia)  Rank-888-William Hill  bwin-Partygaming  Amaya-Rational  Bwin-Ongame  Sportingbet-Paradise Poker  Rank-Blue Square

Bixteth Partners, October 2019 The next 20 minutes

 Setting the scene  Market appraisal  The last 10 years  Megabet  The unknown  In summary

Bixteth Partners, October 2019 Setting the scene

4  Online Gambling 1.0  Inception to UIGEA 2006  Online Gambling 2.0  End 2006 to May 2018  Online Gambling 3.0  Post PASPA world  Industry has changed beyond all recognition  Driven by M&A  None of the quoted big three existed in current form five years ago

Bixteth Partners, October 2019 Market appraisal (c.€48bn)

2% 2%

5% 4% 9% 4% 11%

53% 51% 27% 27%

Europe Asia/Middle East North America Oceania Lat Am/Caribbean Africa Sports Casino Poker Bingo Skill State Lotteries

Bixteth Partners, October 2019 Source: H2 Gambling Capital The last 10 years

 2009: top 3 operators’ revenue share c.7%  2019: top 3 operators’ revenue share c.20%  Volume of deals  Value of deals

Bixteth Partners, October 2019 Market view: three years ago

 Large, growing, global industry with small number of large players and large number of small players:

 Growth rates framed by regulatory and technological change

 High margins and strong cashflow conversion should lead to relatively high and progressive dividend payout policies

 Regulated markets warrant a premium to reflect earnings security

 Consolidation inevitable and will drive synergies, grow margins and increase market share

 Industry will crunch down to 2-3 large global players and long tail of niche operators

 The U.S. will ‘never’ regulate

Bixteth Partners, October 2019 M&A, why and why now? (2016)

8 Why? Why now? Cost synergies Market growth is slowing Enter new geographies Regulation is increasing Exposure to new products Taxes are rising Acquire new skill sets Technological change is accelerating Accelerate earnings growth Marketing costs are increasing Buy talent ‘A couple have worked’ Diversify ‘Everybody else is doing it’ Reduce risk

Bixteth Partners, October 2019 Megabet

 Similar to the global brewing industry, online gambling to consolidate down to a handful of players

 Mass market offerings under global brands

 Niche offerings focussed on geography and product

 GVC Holdings, The Stars Group and Flutter Entertainment

 Multi product, multi jurisdiction

 All have different US strategies

Bixteth Partners, October 2019 Recent trends

 Hybrid business models  Playtech acquisition of Snaitech  Private equity investment  Bridgepoint, Blackstone, Clairvest  Focus on proprietary tech  BetBright  Supplier consolidation  RedTiger/Net Ent

Bixteth Partners, October 2019 The unknown

11  Proliferation of M&A over the last 12 months  Too early to identify successes  Role of regulator increasing in importance  Role of competition authorities  Homogenous product or discreet markets  Digital interaction with retail  US market strategies  Pace of change uncertain  Scale of profitability achievable unclear

Bixteth Partners, October 2019 M&A success and failure – the benefit of hindsight

Bixteth Partners, October 2019 In summary

 Industry has changed beyond all recognition  Consolidation been dramatic  But more to come  US dynamics unclear  China yet to enter the fray

Bixteth Partners, October 2019