M&A in the Spanish Gambling Market

By Gambling Insider
Regular Gambling Insider contributor Xavi Muñoz Bellvehí ([email protected]), gaming lawyer at Spanish law firm ECIJA, analyses the M&A options for entering the Spanish gambling market


The Spanish gambling and betting market was regulated in 2011 by Law 13/2011 and a series of statutory regulations. There are currently around 80 operators holding gambling licences and around65 actively offering their online gambling and betting services in Spain. The third window for the Spanish gaming licences closed at the end of year 2018. Since a new licensing window is not expected any time soon and gambling licences are non-transferable, they can only be acquired or sold in the framework of an M&A transaction. Therefore, any company wishing to enter the Spanish gaming market can only obtain a Spanish licence by acquiring an already existing operator. And any operator wishing to sell all or part of his business should prepare for it.

The offering of any gambling or betting activity in Spain is subject to obtaining a prior licence. The Law foresees three types of licences: General Licence, Singular Licence and Authorisation. Operators holding a General Licence will be able to apply for any type of Singular Licences at any time(unlike General Licences there is not a specific licensing window for Singular Licences as long as the company already has the covering General Licences).

With the passing of the “2018 General State Budget Law”, a tax reduction entered into force in the gaming taxes, under which, with the exception of draws and promotional games, the taxable base of all other games will be on the win (defined as the wagered amounts minus the pay-out of prizes).



Additionally, there is the annual tax of 0.00075% on the gross income of the operator, which will have to be paid by all brands in the market. Finally, the special tax regime applicable to the companies located in the tiny Spanish enclaves of Ceuta and Melilla must be highlighted. Such operators will have a reduced taxation for all games, a 10% on win, representing a 50% reduction in comparison with the rest of the operators in Spain. And they also have a reduced taxation on corporate tax and other taxes. On 3 November 2020, the Spanish Government passed the Royal Decree 958/2020 on Commercial Communications. Such regulation which is now fully in force has restricted quite significantly the publicity options for gambling operators.



To structure an M&A transaction in the Spanish online gambling market, the first factor to take into account is that the direct transfer of gambling licences is prohibited under Spanish law (section 9 of Law 13/2011, of 27 May, on Gambling Regulation). However, the shares of the company holding the licence can be acquired. We believe that due to the high number of operators in the market there will be operators who will not be able to continue or even start their business – and will be willing to sell. As Spain is based on a closed-licence system, the only way to enter the market will be through an acquisition process.

The acquisition process of a Spanish online gambling operator will entail all the normal steps of any corporate M&A acquisition process. Nevertheless, due to the specific regulations to which an online gambling operator is subject to, specific issues from its regulatory sector shall be taken into account. Overall, the process can be divided into the following steps:


STEP 1 – The search of the target company:

The research of a target company should be among the 80 companies in Spain holding gambling/betting licences. However, only a few of those companies would be interested in selling or accepting an investment and, therefore, some research and shortlist has to be made. From the feasible targets, the buyer will have to select those holding the licences they are interested in acquiring (betting; casino games; contests).Within those companies, the buyer shall select the company which fits its purposes and budget (ie. the expected prize, client base, technology, team). Likewise, potential sellers shall have to concentrate on said aspects to make its company attractive to potential buyers.


STEP 2 – Valuation of the target company:

Once the target company has been identified, the seller will have to execute a business valuation process which will have to take into consideration issues regarding the business operations, productive assets, historical performance, KPI’s, evolution of the gross gaming revenue (GGR), number of active players accounts, potential fines, etc. To obtain some of this information, it might be necessary to directly contact the target company. In doing so, the parties shall sign a non-disclosure agreement (NDA).


STEP 3 – Signing of a Letter of Intent:

Depending on the amount of information pending to be confirmed and the pending points to be agreed upon regarding the conditions for the transaction (total or partial acquisition; upfront price and earn out; price conditioned or already agreed upon; time schedule for the execution of the agreement; keeping all or part of the team, etc.) the parties shall sign and execute the Letter of Intent broadly detailing the main aspects already agreed upon between the parties.


STEP 4 – Due diligence process:

The investigation and verification process to make sure that the transaction fulfils with all the necessary conditions will have to take into account in addition to all the usual issues (i.e. business, financials, tax, employment, corporate) specific issues for an online gambling operator. Such issues shall include, but not be limited to:

  • Date of issuance and renewal of the licences and any potential risk related to the licences. Bank guarantee in place
  • Software agreements with all and any provider who conforms to the gambling platform, the games, the CPD, the safe and any other necessary element
  • Corporate compliance level of the company: Online gambling operators are subject to a high level of corporate compliance obligations (i.e. special subject to AML obligations; need of DPO in personal data protection; and others). Therefore, the validation of the fulfilment of all the necessary obligations under Spanish law shall be of the essence
  • Specific gambling regulatory validation: Check if there is any fining procedure in process. Fines in the Spanish gambling sector can be very high, going up to €50m ($57.7m), although we have never seen fines above €1m.Two serious breaches within a period of two years entail a very serious violation of Spanish law, and can therefore entail an economic sanction from €1m to €50m, as well as the potential loss of the gambling licence, the existence of previous fines from the gambling regulator also has to be carefully checked.


STEP 5 – Signing and Closing of the Sale and Purchase Agreement (“SPA”):

The clauses of the SPA that will have to be more vigilantly negotiated will be:

  • Representations and warranties of the seller: The findings of the due diligence process will have to be duly analysed and included in the representations and warranties of the SPA.
  • Limitations of responsibility: taking into account the buyer will be assuming any contingency or liability that may arise in the future, the limitations of the liability for the R&W made by the seller will play a key issue in the negotiation of the SPA.
  • Price and payment structure: the operation may be structured in a wide variety of ways. The acquisition may be total (100% of the shares of the company) or partial (51% of the shares of the company or less). Additionally, in both cases, the parties may be interested in deferring or conditioning the payment of the price to the obtainment of specific results (i.e. partially conditioning the payment of the agreed price to the maintaining or increasing of the company’s results or certain KPI’s, and/or performance of key personnel). Likewise, the potential granting of stock options or vesting plans for key employees, the establishment of call options for the investor to buy the shares not acquired in the initial equity investment, and any other mechanisms, shall be duly established in the SPA.


STEP 6 – Notification to the Directorate General for the Regulation of Gambling (“DGOJ”):

The transfer of shares will have to be notified to the Spanish gambling regulator (DGOJ) once executed, together with all the relevant information on the new owner of such gambling licence (related parties; ultimate beneficial owner; etc.). Finally, it shall be noted that corporate restructuring operations such as mergers, splits or spin-offs of branches of activity are subject to the obtainment of a previous authorization by the DGOJ, which will depend on the following factors:

  • That the company fulfils all necessary requirements to hold a gaming licence under Spanish law (this is in accordance to article 13 of the Law 13/2011)
  • That the corporate restructuring operation is duly executed in accordance to corporate applicable laws and regulations
  • Then, the DGOJ shall grant a “pre-approval” of such corporate operation, which will be valid for three months
  • That the new company acquiring the gaming licence shall assume any responsibility for any issue regarding the gambling activities developed by the gaming operator. In these cases, the execution of the operation gets more complicated as the authorisation is compulsory and has to be obtained previously to its execution, and therefore slowing down the procedure. Each M&A operation will be different and we consider essential to both, buyers and sellers, to plan well ahead the transaction. Some of these transactions may also have an added level of complexity as the selling company may be a gambling operator located in Malta, Gibraltar or Ceuta.