21 March 2005
As the UK and global betting and gaming industries expand rapidly, accountancy practices and law firms that advise the sectors are increasingly working together. A number of law firms specialise in the area, and their relationships with the accounting practices with presences in the gambling market are generally well established.
It is often at a preliminary stage of the development of a start-up that contact and referrals may be made, as a new business seeks to establish operations within a certain jurisdiction, needing tax, regulatory and commercial advice from both lawyers and accountants. Similarly, established businesses often seek to expand into new geographical markets or to set up online operations in alternative jurisdictions to take advantage of more favourable infrastructure, tax or legal conditions. Again, experienced legal and accounting advice is always required.
However, in recent times, an increasing number of significant deals involving gambling operators has signalled an expansion in the volume of work, as well as a change in the nature of some of that work. At present, the global gambling market is experiencing increasing consolidation (as evidenced by SportingBet's acquisition of Paradise Poker), as well as increasing numbers of IPOs and further capital-raising occurring on the London markets, as successful brands look to acquire competitors and, crucially, their customer databases.
In recent years, the IPOs of William Hill and SportingBet indicated the capital markets' increasing appetite for gambling stocks; and more recently the accelerated IPO of Gaming VC demonstrated an increasingly openminded attitude among investors to a sector previously regarded as being risky. Other major listings are expected, and if the sector leaders go to the market, the size of the deals is likely to be eye-catching.
Whether they do get away and, if so, at what price, remains to be seen, but what investment banks and institutional investors now increasingly realise is that there are hugely successful businesses in this sector enjoying extraordinary growth and showing considerable ongoing potential. Concerns over such issues as an over-reliance on US bets or regulatory jurisdictions are no longer seen as barriers to entry to the capital markets - rather, they are obstacles that can be overcome.
As a result, lawyers and accounting practices are increasingly working together on large transactions for gambling companies, including M&A and corporate finance work.
On the capital-raising projects, the larger City firms are getting in on the act, despite a lack of sector expertise.
Also, with the Gambling Bill attracting a very high profile and promising (eventually) a considerable expansion in casino gaming in the UK, there has been considerable interest in the UK terrestrial gaming market from overseas. Large overseas and UK casino operators have engaged specialist advisers, including lawyers and accountants, on projects around the country, a number of which will soon be competing for a more restricted, albeit still very lucrative, number of licences.
The overall result of these developments, as well as an increasing consumer spend on gambling, means a greater volume of work for those firms of lawyers and accountants already known in the market, with individuals within those practices increasingly specialising to the exclusion of other areas. In addition, there are increasing numbers of forays by less experienced firms into the expanding sector, particularly on the large corporate transactions.
It is certainly a growth area and one in which we can expect to see legal and accounting firms continuing to work together.
Tony Coles, partner, Jeffrey Green Russell