Regulation of the sports betting sector in Brazil is generating great interest among investors and driving industry consolidation, according to recent research conducted by Hand.
The study reveals that the digital betting market, popularly known as 'bets', has witnessed impressive growth of more than 160% in the last two years, with almost 500 companies operating in the country.
On the global stage, Europe leads the online sports betting market, with a share of 40% to 45%, followed by Asia with 30%. The Americas, in turn, account for a smaller share, with North America representing around 15% to 20% and South America contributing 10%. However, regulation in countries like Brazil and Colombia is positioning South America for significant growth.
Provisional Measure (PM) 1,182 edited by the Federal Government in July 2023 brought regulations for sports betting companies, establishing the need for an operating license, valued at R$ 30 million (US$ 6m) for a period of 5 to 10 years, subject to analysis, in addition to tax payment requirements.
In addition to the license to operate, the regulations include taxes on the Gross Gaming Revenue (GGR), with a rate of 18%, as well as a Gambler's Tax, which will charge 30% of Income Tax on winnings above of R$ 2,112 (US$ 425).
José Venâncio, partner in Mergers and Acquisitions at Hand, shares his perspective on the scenario: "While the global betting market is growing at rates of approximately 10% per year, the Brazilian market is showing rates of over 90% in the same period. This leads us to believe that, in the near future, the betting market in Brazil could represent up to a fifth of global revenue."
In the national context, technological innovations, such as PIX, are simplifying access for bettors to platforms and expanding revenue potential, in addition to the vast Brazilian population, robust digital culture and passion for football, the sports betting market presents an immense potential.
In the study, Hand identified that 67% of Brazilians who bet online do so for entertainment and fun, with football being the most popular sport.
In the survey, the company indicated that bet365, Sportingbet, Betano and Betfair are the bookmakers most sought after by Brazilians on Google, having together more than 30 million monthly searches (data from 2022).
Hand detected the existence of 450 sports betting houses currently operating in Brazil. According to the survey, 247 are startups and were not considered as companies to be incorporated. Venâncio believes that they will cease their activities as time passes and the sector consolidates.
This number may be an indication that there are large spaces for mergers and acquisitions when the regulation of the sports betting sector is fully defined.
According to the survey, 35% of the companies have annual revenues between R$5 million (US$ 1m) and R$50 million (US$ 10m), while only 15% (68 companies) have revenues of more than R$50 million. In Hand's evaluation, this universe of 35% is the most subject to merger processes with major global players, while those with revenues above R$ 50 million can receive investments, including by funds interested in the segment or by major global players.
While the main players in the market will remain, the regulation also opens doors for investors and large international groups listed on the stock exchange.
Venâncio explains: "We estimate that around 15% of current companies will have the financial capacity to adapt to this new regulatory reality. This creates a window of opportunity for investments, as investors are more confident in allocating resources in a formalized sector. Companies that do not have the necessary structure and capital to adapt to legalization will likely be absorbed, which will contribute to the consolidation of the Brazilian betting market, including the entry of large global groups through the acquisition of local competitors."
In the view of Thiago Martins, businessman in the sector and Hand's partner in developing this study, the size and economies of scale of betting companies are factors that will make a difference as this sector evolves.
“As the product offering and marketing strategies of bookmakers are, in a certain way, commoditized, the sector is heading towards a scenario of price competition, in which players with greater financial strength and operational efficiency tend to dominate. A fact that does not exempt medium-sized houses from having interesting assets for a possible acquisition. It is a situation that has already happened in other countries, and that is seen through conglomerates such as Entain, Flutter, 888, among others.”
About Hand
Hand is an independent consultancy specializing in the sale, purchase and management of companies. The company believes in the transforming power of people, combined with technology and transparency. In this way, it uses its own methodologies to solve complex problems and generate value for companies. More information: https://www.handgc.com.br .
Source: GMB
