When Evoke announced its acquisition of Winner.ro last Friday, it set a precedent. Not just one that indicated a particular regional focus, but also how any future Evoke M&A might be handled.
The details of the plans are clear. Evoke will acquire New Gambling Solutions, which operates Winner in Romania. by injecting its own Romanian business and providing €10m ($11.1m) in cash consideration for a 51% share in the combined business.
Evoke predicts that the new business would create the #4 group in Romania with a market share of 7%, which is no mere pocket change when it emphasises the figures from Regulus Partners that claim this market is worth €1.1bn in net revenue and will grow at a compound annual growth rate of 13% from 2023 to 2026.
While the deal will start with Evoke holding a 51% ownership, it’ll have the choice to increase this to 100% on the third anniversary of the deal closing. The transaction is subject to local regulatory clearances but is expected to be completed at some point in Q3 2024.
“We are laser-focused on our value creation plan, we have no plans for M&A,” Widerström was very firm in the H1 conference call, but he went on to explain that the company will continue to pursue capital-light, high-impact M&A and partnerships
Why did Evoke choose Winner?
Considering that Romania has an extensive and healthy history with gambling, the Oficiul National pentru Jocuri de Noroc (ONJN) operates under strict conditions. At the time of writing, only 31 operators are listed on the website as being licensed, which includes 888 Romania and New Gambling Solutions (By comparison, there are 2,746 on the Gambling Commission’s register).
Along with Winner, the latter has 14 domains listed such as Seven, Lady Casino and Mr Play. If choice was important to Evoke – or if relinquishing control of only one domain was important to the operator – then with almost all of the other operators only having one domain it seems like New Gambling Solutions, and thus Winner, was an easy choice.
The business is already well established, too. Winner has over 20,000 retail deposit points and it will continue to operate on the third-party Newton platform, benefitting from a highly localised technology, product and player platform.
It’s also worth mentioning that the current Winner CEO, Nicklas Zajdel, agreed to manage the combined business.
“This is an incredibly exciting transaction, bringing together our local-hero brand, with one of the world's strongest international casino brands,” Zajdel said. “Romania is a high-growth market, and this combination sets us on the path to a sustainable, profitable, market-leading position. Winner has a strong leadership team and we are building on our success in the market through our highly localised approach, and competitive advantages such as our product platform, our enhanced personalisation, and wide network of deposit points.”
“It is also consistent with our M&A strategy to focus on low-capital, high-impact combinations that accelerate the delivery of our strategy” – Per Widerström, Evoke CEO
Evoke already has around 500 employees based in Romania, “which is one of evoke's strategic centres for group functions” according to the release, which has proven to be popular with a few different operators and providers in recent years. Naturally, this leads to the next question.
Why Romania?
Evoke confirmed that Romania will become its fifth core market, meaning it will join the UK, Italy, Spain and Denmark as focal points for the company. “Each of these are large and highly attractive regulated markets, where the group is well placed to deliver sustainable profitable growth,” Evoke said in the acquisition press release. “The combined business is targeting a podium position by leveraging its enhanced local expertise to grow market share.”
Returning to Romania’s history with gambling, it was legalised in the country once the Soviet Union fell in the 1990s and the first casinos opened back up in 1991. Two decades later, online gambling was legalised and the ONJN was formed.
Since then, around 500 companies have been awarded a licence from the regulatory body and helped establish a flourishing gaming ecosystem.
The figures from Regulus Partners claim that this market is worth €1.1bn in net revenue and will grow at a CAGR of 13% from 2023 to 2026
The Central and Eastern European (CEE) region has been one that a few different operators have been watching carefully over the past few years. Of course, Evoke isn’t the only company with eyes on Romania. When Gambling Insider spoke to Soft2Bet’s CPO Yoel Zuckerberg earlier this year, he said similar: “Romania is a highly competitive market where we believe we can grow strongly.”
From looking at the figures, it seems there’s excellent potential there, but if the industry has learned anything from the past few years, it is that great potential does not always translate into healthy revenue.
So why is Evoke now looking at expanding its presence in Romania, when all of the reports have made it clear that the company is actually looking to reduce its markets? In the past year, Evoke has sold both its US and Latvia businesses and has emphasised time and time again that its core markets will be the UK, Italy, Spain and Denmark.
And now, seemingly out of nowhere, Romania enters the stage.
Is Romania a good idea for Evoke?
Perhaps a more fitting way to look at the decision is to look at the risk Evoke is taking and the consequences that could come of it.
To achieve a 51% share of the combined Romanian business, Evoke is paying a cash consideration of €10m. This is a huge sum of money, but in comparison, the same company paid £1.95bn ($2.35bn) for William Hill in 2022.
So rather than simply buying large companies outright, Evoke is being more strategic about it. The Board has said as much itself.
“It is also consistent with our M&A strategy to focus on low-capital, high-impact combinations that accelerate the delivery of our strategy,” Widerström said. The low-capital, high-impact point is the critical one here. Winner is already a very established brand in Romania.
"Winner has a strong leadership team and we are building on our success in the market through our highly localised approach, and competitive advantages such as our product platform, our enhanced personalisation, and wide network of deposit points" - Nicklas Zajdel, CEO of Winner
Both Widerström and Zajdel noted the potential for growth in Romania, which is also a major factor. The UK, Italy, Spain and Denmark already have a very mature market, while Romania only has a few operators live in the country - with Evoke and NGS being two of them. If the jurisdiction has as much potential as everyone is saying, then it makes sense for Evoke to leverage its position in the country to get ahead of a possible gold rush.
Evoke has played this very smartly. The low capital €10m cash consideration to create a combined business that will capture 7% of the market share in a developing gambling ecosystem. It almost doesn’t feel like a gamble at all.
Even though Widerström was firm in the H1 conference call, saying that: “We are laser-focused on our value creation plan, we have no plans for M&A,” he went on to explain that the company will continue to pursue capital-light, high-impact M&A and partnerships.
Is it a Winner’s move?
Only time will tell whether this was the right thing for Evoke to do, but it certainly seems like it’s been done with strategy and forethought in mind.
Winner is an established brand, it’s in a market where Evoke is already operating and rather than selling the business, like it did with the US and Latvia, it’s putting €10m on the line to see if it can gain good capital back in return. It’s exactly what Widerström keeps saying, it’s capital-light and has the chance to be high-impact.
It seems like the investors think so too. The Widerström effect continues to accelerate, with the share price up 21% this past month and up 10% this past week alone. While we won’t be able to see the effects of this acquisition for some time, with it not closing until at least Q3, it’ll certainly be interesting to see how many other major operators also turn their heads towards the CEE in the coming months.
