Currently, the betting market is experiencing a growing trend in the number of mergers and acquisitions (M&A) among operators. This movement is strongly influenced by the high regulatory costs associated with the licensing process, including a licensing fee that can reach R$ 30 million (US$ 6m), technical certifications, and tax burden. Together, these factors can pose a significant challenge to the economic sustainability of smaller operators.
In this scenario, a crucial question arises regarding which specific assets are prioritized in the sector's acquisition strategies. Betting operators often seek to acquire sublicenses for essential components of the technological structure, such as software, servers, data centers, sportsbooks, slots, live casinos, and APIs. This raises the question: what are buyers actually acquiring?
Prior to regulatory milestones, when obtaining licenses for authorized activities is not a reality, acquisitions mainly focus on two key categories of assets: (i) user databases and (ii) intellectual property rights. Each category has its own characteristics and mechanisms for creating and appropriating value.
Specifically in the Brazilian context, it is crucial to develop user engagement and retention strategies that are aligned with local culture and social phenomena. This is especially relevant for foreign investors who may not be fully familiar with these local aspects. It is anticipated that success in the market will benefit not only those with extensive investment capacity but primarily those who can establish a strong connection with Brazilian bettors.
With the advent of regulatory measures, the license to carry out authorized activities is expected to become an extremely valuable asset. If trends in international markets are reflected in Brazil, a significant increase in M&A transactions is expected, especially focused on obtaining regulatory licenses.
However, it is essential to consider certain regulatory aspects. According to Law 14,790/23 ("Betting Law"), any transaction resulting in a change in the shareholder or administrative control of licensed operators may be subject to review of the authorization granted, requiring a case-by-case analysis by the Ministry of Finance (the "Regulator").
Furthermore, it is essential to ensure that M&A activities comply with the guidelines of the Administrative Council for Economic Defense (CADE) regarding fair competition.
In light of the preliminary valuations of betting operations and M&A activities focused on the Brazilian market, an undeniable movement towards long-term consolidation becomes evident. Thus, this trend reinforces the importance of a thorough analysis of both the assets involved and the regulatory implications, seeking effective M&A strategies in this constantly evolving market.
The Bichara e Motta Advogados team is closely monitoring the development of betting regulation in Brazil and providing legal advice to various players in the market.
Source: Bichara e Motta Advogados
