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Currently, the betting market is experiencing a pronounced trend towards an increasing number of mergers and acquisitions (“M&A”) among operators. This trend is primarily driven by the substantial regulatory costs associated with the licensing process, including authorization fee that can reach BRL 30 million (thirty million Brazilian reais), technical certifications, and tax obligations. Collectively, these factors pose a significant challenge to the economic sustainability of smaller betting operators.
Within this landscape, an essential question arises concerning the specific assets that are prioritized in the sector’s acquisition strategies. Betting operators frequently aim to acquire sublicenses for indispensable components of the technological stack, including software, servers, data centers, sportsbooks, slots, live casinos, and APIs. This situation raises a critical inquiry into the true focal points of these acquisitions.
Prior to the establishment of regulatory frameworks, when obtaining licenses for authorized activities is not an option, acquisitions predominantly focused on two key asset categories: (i) user databases and (ii) intellectual property rights. Each category is distinguished by its unique mechanisms for generating and capturing value.
In the Brazilian context, developing strategies for user engagement and retention that resonate with the local culture and societal phenomena is paramount. This holds particular significance for foreign investors who might not be intimately familiar with these local factors. Success in the market is anticipated to favor not necessarily those with the most substantial investment capacity but those who can establish a profound connection with Brazilian bettors.
With the advent of regulatory measures, the license to conduct authorized activities will emerge as a highly prized asset. If trends from international markets are to be mirrored in Brazil, we can expect a significant increase in M&A transactions, specifically targeting regulatory licenses.
Nonetheless, it is crucial to consider specific regulatory aspects. As stipulated by Law 14.790/23 (“Betting Law”), any transaction that leads to a change in the shareholding or administrative control of licensed operators may be subject to a review of the granted authorization, requiring case-by-case analysis by the Ministry of Finance (the “Regulator”). Moreover, ensuring that future M&A activities adhere to the Administrative Council for Economic Defense’s (“CADE”) guidelines on fair competition is essential.
In light of the initial valuations of betting operations and M&A transactions focusing on the Brazilian market, an undeniable move towards long-term consolidation is evident. Therefore, this trend highlights the importance of conducting detailed analysis of both the assets involved and regulatory implications, targeting successful M&A strategies in this dynamically evolving market.
Our legal team at Bichara and Motta Advogados are attentively monitoring the regulation of the betting industry in Brazil, offering legal advice to multiple market participants.
For further information, please visit: www.bicharaemotta.com.br.