Why don't offshores merge?

WildBill · Mar 23, 2003

I was looking over some numbers with an investment group I advise that owns a couple of "operations". I asked them why they don't buy up other operations and they said because books almost never merge. I just wonder why? Why is the closest thing they do an "umbrella" move most of the time? Why do the weak books just fight it out with weak customer lists for so long? Is it ego or some other barriers. While we all like to have a variety of numbers up on offer, I think the continuing worries of weaknesses all over the place makes it seem much more sensible to have some consolidation. From what I understand about some of these weaker operations I reviewed, they would do much better to sell out now and have a slow transfer of name over to a bigger book over a 6-12 month period.

If anyone really asked me, here is what I would do. I would have a book say Weaklines sell right now to Strongnumbers. Weaklines just keeps operating name and all through bases and football. The key is that Weaklines gets switched over to call center of Strongnumbers and the customers won't know any better. Isn't now the time to do it, as you won't need clerks until football? The other benefit is that you can use the Weaklines customers and Stronglines customers in a proper way to push different numbers, but still end up in the general ballpark, ie. Weak could post Angels -115 and Strong has Angels -110. The Weak players tend to get the dog +05 and the Strong players tend to lay the Angels -10. While it cuts your profits somewhat, I am sure most books are happy to take a lot of balanced action these days instead of having to put up an opinion during the weak summer months.

Just the conclusion I came to after seeing what is out there. And just led me to more questions so I would like to hear what you all have to say about it.

Guest · Mar 23, 2003

WildBill

You mind if i copy this to Offshore?

Very interesting topic, imo.
Would like to see it get more attention.

Let me know please.

peskypup · Mar 24, 2003

In mid-2002 i saw 2 mergers which affected the UK books I am with. 2 very different approaches.

I don't bet much on the main UK betting sports of soccer and horses but I bet on most of the rest.

sportingbet bought sporting odds. They kept up two separate sites, but modified their software so that in many sports their odds and rules are the same.

I have not noticed any reduction in lines offered or any other aspect of customer service.

UK betting took over sports.com. I admit to being a fan of sports.com so my comments are probably biased, but I have noticed a considerable service reduction.

firstly the sports.ocm site was axed. It would appear also that many of their desks went, since UK's lines in tennis, formula 1 and other sports are a mere shadow of what sports.com's were.

also sports.com tended to offer -110 juice on US sports, whereas -120 is the norm from UK betting. I for one rarely bet on any US sport with UK betting now, you need at least 1 extra point on the spread to make -120 worth it.

So overall marks out of 10 for sensible mergers:

sportingbet gets 9
uk betting gets 4

WildBill · Mar 24, 2003

Go ahead, I post on things like this and get little response over there though. It seems like only really controversial subjects get much play over there and only if one of the controversial people says something to get it started. Sadly I think the thinkers are pretty much in short supply on this board, but I like the traffic so I chime in when I see something I can add to.

Guest · Mar 25, 2003

Wild Bill:

I think that most offshores, unfortunately, would rather try to gamble their way out of a bad situation, than merge.

Why? Perhaps it's because they are gamblers at heart, or because they came from the "street" or perhaps they want to "be the boss"..

I think more offshores mergers should take place, it would be much more efficient and better for the overall industry to have 10 or so goliaths.

JC

oldmantime · Mar 25, 2003

WildBill---Adding my voice of agreement with you 100%. It would be a win/win situation for all, but I can see Joey's point as to why he believes it happens so little.

corey · Mar 25, 2003

Ego, Ego, Ego.

kayaman+ · Mar 25, 2003

At least in Costa Rica I don't know that it would be a win win for all, in particular the staff. Here the largest books (size, client list, staff) also tend to be the lowest paying. Big offices pay much better. Personally I'd rather work for a big office with a staff of 10-30.

miamiman · Mar 25, 2003

Wildbill - interesting post.

I agree not many books have bought out others.

Sportingbet went on a run where they bought 4/5 books around the world, betmaker deal was good value, sportsbook.com turned out to be a disaster - they have paid (cash+shares) more than the whole of the sportingbet group is worth,they bought sportingodds - turned out many (large %) of the customers were already with sportingbet, sportingodds has been a loss maker for the last 2/3 years, they bought superbook - premier league - this database was full of sharps/wiseguys , so they had nothing when they got rid of these players, they took over the number one shop from Austraila, they paid good money (shares+cash) for this place, after a few months they decided they did not want to take on the sharps, turnover decreased at least 30% from Aus,done some deals in Asia Mr Simm etc, did not go according to plan, so they got ****ed a few times.

It's not that easy as the above shows, hence why the company has gone from been worth 130M sterling to 50M Sterling.

WildBill · Mar 25, 2003

I was aware of those deals, but those mostly were attempts at taking reputable names with existing shareholder structures. The books I have reviewed numbers with have a few backers, mostly driven by a majority partner. These guys have modest staffs with modest wages. The key thing here isn't so much the savings on the clerk costs, but the savings on the people that really cost you money which are managers. After all, in CR a good line manager seems to make the wages of about a dozen clerks. I can see ego playing a role in it. If a good book bought out a weak book and offered them 20% of the future profits, they would hate themselves and quickly try to start up a new operation.

As I see it, the key to merging is reduction in advertising costs and top managers. Not to mention if you keep two trade names you can better specialize your customer base and work your numbers in favorable ways. As for the wiseguys, I don't think its as big a factor as one would think in mergers. People I advise are well aware of what the perceived level of wiseguy action is for most books. Further its plain to see when you look at the numbers, the margins make it clear who has square action and who has sharp action, especially if you evaluate it in light of the number of active customers they have. We would pay mostly based on these factors so its unlikely we would be overpaying for a book that was all sharp action that wasn't profitable.

CasinoNow · Mar 26, 2003

I believe that the largest problem with sportsbook.com was the issue of wiseguy action. They should have known in advance, with any level of due diligence, that specific books catered largely to the wiseguy market.

With that in mind, they clearly made the wrong choices in that matter. If they didn't want the action, it makes no sense to waste good money buying a book that caters largely to those players. If you are going to buy those properties anyway, then a better course of action would have been to pick one book to push all of the wiseguys to rather than cutting them out completely (which defeats the purpose of that specific acquisition).

Had they done either of those things, they probably would have had a better outcome.

WildBill, I have to say this is one of the better topics I've seen here in a while. I would add that a slightly better approach would be to perge two books rather than merging them entirely. By this, for example, I mean to have two books that come together, with one focusing on US sports, and the other focusing primarily on Soccer, Cricket, Rugby, etc. Maybe perge a 3rd book into the fold that strictly handles financial wagering. It is a more difficult approach than a merger in terms of profit distributions, but can have it's own rewards if managed properly.