Of Big Fish and Little Ones
A Maltese perspective on M&A activity within the gambling industry
It is a truth universally acknowledged that the big fish eat the little ones – in business at it is in the
The online gambling and video game industries have undergone an explosive trend of mergers and
acquisitions, particularly over the past 6 years, often worth billions of dollars, creating a significant
buzz within the wider industry. The main drivers of this M&A activity include the overall growth of
the gambling industry, the slow but steady opening up of the U.S. sports betting industry and other
geographical markets across all continents, and undoubtedly the Special Purpose Acquisition
Company (SPAC) trend that has boosted acquisitions across all sectors.
Market-trend-based strategies for the online gambling market include investing in Artificial
Intelligence (AI) technology to enhance user experience, integrating cryptocurrency as a method of
payment, building mobile apps, investing in Augmented Reality (AR) and Virtual Reality (VR)
technology, sponsoring sports events with large audiences, collaborating with celebrities and
influencers, providing free access to games with certain main features and offering cross platform
support for games.
Incumbent operators and investors seek to get quicker access to tried-and-tested technology, robust
customer databases, and a wider spectrum of markets and licences, achieving the speed-to-market
through acquisitions rather than organic growth, given the sheer pace of market development and
also the significant opportunity cost of time and resources.
According to the EuropeanGaming portal the online gambling market reached a value of nearly
€73,597.4 million in 2020, having increased at a compound annual growth rate (CAGR) of 13.7%
since 2015. The market is expected to grow from €73,587.4 million in 2020 to €122,148.15 million in
2025 at a rate of 10.7%. The market is then expected to grow further, at a CAGR of 8.6% from 2025
and reach €184,264.3 million in 2030. Opportunities in the online gambling market segmented are
expected to increase by game type in the betting segment, which will gain €20,524.8 million of
global annual sales by 2025. Opportunities in the mobile segment will also rise, gaining €33,986.5
million of global annual sales by 2025. The online gambling market size will gain the most in the USA
at €8,102 million. 
These numbers are quite astounding, and it certainly promises to be a very interesting ride ahead! It
has increasingly become a matter of “hunt or be hunted”.
Malta as European Gambling Hub
Malta established itself as a hub for online gambling regulation as early as 2001, recognising the
need for a robust regulatory framework to support gaming operators having global strategies and
ambitions. The legal and regulatory framework was recently modernised, through the
implementation of several changes driven by consumer trends and political developments. Evolving
technologies and game-play preferences set the scene for a robust, technologically neutral
framework which also introduced principles of “mutual recognition”, attributing regulatory
equivalence to operators holding licences in jurisdictions offering suitable regulatory protection to
consumers. This last initiative was undertaken in the context of the rise of national regulatory
frameworks for online gambling across the EU Members States. The 2018 amendments also
introduced additional controls, based on the regulatory learnings garnered during the previous
Malta’s regulatory framework, supported by a reliable telecommunications infrastructure (high
speed internet across the island) and specialised professional and technical support, is still highly
attractive for operators having a global strategy. Large gambling groups all run certain components
or brands out of Malta. This “pull-factor” has seen several fledgling online casino, poker, sportsbook,
betting exchange and fantasy sports operators call Malta their home, providing them with the right
environment to grow into sizeable market contenders, drawing the attention of the large gambling
groups looking to increase market share, or introduce new technologies and content.
A Buyer’s Perspective
Within this context, buyers in the online gaming space frequently encounter Maltese components
within merger and acquisition deals, typically having one or more Malta-based companies included
within the transaction, necessitating the engagement of legal, tax and financial advisors in Malta to
assist with the pre-acquisition due diligence process, structuring and the completion of all conditions
precedent for the finalisation of the transaction.
During our daily legal practice, we handle several acquisitions in the gambling space simultaneously,
acting for buyers, sellers, investors, investment banks, commercial banks, private equity funds,
venture capital funds, institutional lenders, and management groups. Having said this, the bulk of
the deals we work on are on the buy-side. Whilst no two deals are ever the same, our role typically
involves the leading of all Maltese legal and regulatory aspects of the deal, handling the legal,
employment and regulatory due diligence, drafting or reviewing the heads of terms and share
purchase agreement, structuring the financing documentation relating to the deal and co-ordinating
the accomplishment of all conditions precedent, necessary for completion.
Whilst deals vary in their approach, size and nature, the bulk of what we see is structured as an
outright acquisition of shares in the Malta target (usually a holding company which, in turn, ownsa
Malta-licensed gaming operator subsidiary), as opposed to asset deals. When they do happen, asset
deals tend to be somewhat more complex, requiring the careful legal definition and treatment of IP
assets and of the associated rights and corresponding liabilities being undertaken by each of the
parties to the deal.
Maltese law provides that any direct or indirect shareholding of 10% or more in the equity of a
company licenced by the Malta Gaming Authority (MGA) or any financial investment or financial
contribution to the share capital or working capital of a regulated gaming company, or the control of
voting rights in such company is considered to constitute a “qualifying interest”. Once the “qualifying
interest” threshold is established, any transaction involving a change in that qualifying interest must
be notified by the licensed entity to MGA in no later than three (3) working days after the change
takes place, with all supporting documentation relating to the transaction being submitted to the
Authority within thirty (30) days of such change.
The documentation to be submitted to the Authority within the 30 day statutory period include
updated regulatory forms and enclosures for each new entity in the structure, updated policies (if
any), updated personal declaration forms and enclosures for the proposed ultimate beneficial
owners (UBOs) and Directorship changes (if any), the relevant corporate resolutions approving the
transaction, certified copies of the corporate registers relating to the deal, as well as assessing the
source of funds for the consideration. This process involves a significant administrative exercise, and
the effort required for the collation of a comprehensive submission package should not be
underestimated. What is clear from our experience is that the quality of the submission package will
have a direct bearing on the efficiency of the approval process from the MGA’s perspective, making
it easier for the Authority to process the request based on a complete submission of technical and
legal information. It is also relevant to note that the approval must be accompanied by a notification
fee of €1,500 payable to the Malta Gaming Authority, for each approval request.
In the event of a late notification, the MGA may, at its discretion, impose an administrative penalty
on the relevant licensed entity of up to €25,000 and/or an administrative penalty of up to €500 per
day until the breach persists.
It is important to emphasise that although Maltese regulations lay down an ex-post notification
obligation (i.e. notification after the transaction is completed), the Authority has the power to reject
the transaction if it concludes that the fitness and propriety of the licensee may be adversely
impacted as a result of the transaction. In such circumstances, the MGA could effectively order the
licensee to unravel the legal effect of the transaction, reverting to the status quo ante within a
To manage this legal risk, the preferred approach to transaction structuring in Malta is to make the
share purchase agreement conditional upon the MGA’s approval of the proposed transaction,
thereby suspending the completion of the deal and ensuring that the transfer of title in the target
only gains legal effect once the MGA approves the fitness and propriety of the prospective
The MGA’s approval process may vary, depending principally on the complexity of the ownership
structure of the prospective purchaser, since it involves a detailed due diligence approval process,
focussing on the purchasing entity up to the level of the UBO/s. By way of general guidance, a
relatively simple structure should be approved within eight (8) to twelve (12) weeks from submission
of the relative request.
Insofar as asset purchase deals are concerned, there may be significantly more complexity involved,
depending on the nature of the assets forming the object of the acquisition, and how those assets
will impact the continued operation of the licensed entity. Regardless of which assets are to be sold
by the licensee, it is safe to assume that MGA notification and/or approval would be required in such
Here are some key considerations for buyers of a Malta-regulated iGaming Operator to look out for
when considering a target, with particular focus on Business-to-Consumer (B2C) operations.
Be clear about how the Target or the strategic assets identified for acquisition will fit into,
complement and possibly accelerate your current business strategy.
As basic as this may seem, it is critical that the acquisition team handling the negotiation of the deal
are clear about the specific benefits of acquiring the target or specific assets, the true value of the
target or its assets, and how these will be managed post-acquisition to complement the buyer’s
business strategy objectives.
The temptation of buying a licensed gaming company with the sole objective of “acquiring the
licence” makes little economic sense in circumstances where the buyer will need to overhaul the
target’s entire business strategy to bring it in line with the purchaser’s strategy. Experience has
demonstrated repeatedly that if the Maltese remote gaming licence is the sole or principal objective
driving the acquisition, it is likely to be more cost-effective and quicker to set up a Malta-licensed
operation from scratch, with the added benefit that the purchaser would also avoid any historical
“skeletons” in the form of claims or liabilities that may affect the target or its assets.
Be clear about the real value of the Intellectual Property Assets forming part of the deal.
Besides the entrepreneurship and human capital components which are so vital to any operation, a
significant component of the commercial value of a successful online gaming operator lies in the
intellectual property (IP) assets. These IP assets would typically consist, to a greater or lesser extent,
of a combination of intangible assets, including the brand, software, customer database, gaming
content, regulatory and compliance know-how, IT infrastructure, and the integration of payment
As part of the deal-structuring, it is important to assess the true value of each of these assets,
identifying whether they are proprietary (belong directly to the target or another entity forming part
of the acquisition) or, alternatively, subject to licensing or similar arrangements by a third party.
Thus, for instance, the game content is most likely to be provided by one of the large B2B gaming
operators that dominate the industry. When considering any such outsourced arrangements that
depend on third-party service providers, it is imperative that the quality and reliability of that third-
party service provider, and its prospects for future development, are carefully assessed in the
context of the proposed acquisition.
A review of the player database to assess player conversion, player retention and player revenue
statistics is essential, as is the consideration of the geographical location of those players, avoiding
the unwanted regulatory risk of accepting players from risky jurisdictions or geographical markets
which could seek the enforcement of legal impediments or other remedies seeking to prohibit or
restrict the offering of gambling services in that market.
Consider the risks involved in the geographical markets handled by the Target company
The transaction due diligence exercise conducted by the prospective purchaser would invariably
involve a detailed profiling of the target company’s existing license portfolio and its current
regulatory standing with each of the regulators concerned.
A key consideration for the prospective purchaser of a B2C Operator is to engage professionals not
only in the jurisdiction/s where the target is licensed, but also in each of the markets handled by the
target company at the time of the proposed acquisition or which are being considered as potential
growth markets post-acquisition. The main objective of the legal advisors in these jurisdictions
would essentially be to provide an accurate and up-to-date assessment of any opportunities, risks
and pitfalls that may exist in each of those jurisdictions, provided that the purchaser intends to build
on the target’s existing market strategy.
As the regulatory landscape for online gaming operators is rapidly evolving across the EU, Australia
and the Americas and across the entire globe, the value of accurate and timely information for
proper decision-making is imperative, empowering the acquisition team to carefully assess the
commercial opportunities and threats in the context of the proposed transaction and the
purchaser’s wider strategy.
Make a careful assessment of the Target’s Regulatory standing
Given the reality that acquisitions predominantly take the form of an outright acquisition of some or
all of the share capital of that target company, the purchaser should be cautious about “stepping
into the target’s regulatory shoes”. For this reason, getting a full understanding of the target
company’s regulatory standing and of any legal issues that may have arisen is of fundamental
importance for the stability of the target’s business post-acquisition. It is highly recommended that
the prospective purchaser seeks the appropriate comfort through (i) the review of all past
correspondence between the target company and its regulator/s, and (ii) obtaining written authority
from the target to discuss the target’s outstanding regulatory obligations (if any) with the relevant
regulator, intended at understanding the expected remedial action, possible threats to the
continuity of the licence and any financial penalties involved, if any. Based on this information, the
purchaser would have an up-to-date understanding of the target’s regulatory health status, a clear
assessment of the materiality of any outstanding issues, and specific recommendations as to how
those issues can be resolved post-acquisition.
Take a full 360-degree view of the transaction
Get the required guidance and advice from seasoned professionals to ensure that the management
of the deal is managed within realistic and achievable time-frames. The regulatory approvals set out
in this article are only one angle for a buyer to consider. Additional angles to be considered and
covered could include competition (anti-trust) clearances, legal mechanisms driven by the Transfer
of Undertakings (Protection of Employment) Regulations (TUPE), operational and tax optimisation
post-acquisition and the proper management of key roles and responsibilities within the operation
to ensure a smooth transition. Working with professionals that are regularly involved in the industry
provides the insight and guidance necessary to separate critical from less material issues, coupled
with experience-based recommendations to solve any issues in the course of the transaction.