Last Friday (August 23), Evoke announced the acquisition of Winner.ro, setting a precedent. This not only indicates Evoke's focus on a specific region but also shows how Evoke might handle any future acquisition deals.
The details of the plan are clear. Evoke will acquire New Gambling Solutions, which operates Winner in Romania. By injecting its own Romanian business and offering a cash consideration of 10 million euros (11.1 million USD), it will obtain a 51% share in the merged business.
Evoke predicts that the new business will become the fourth largest group in Romania with a market share of 7%, which is significant as data from Regulus Partners shows that the market's net revenue is 1.1 billion euros and is expected to grow at a compound annual growth rate of 13% from 2023 to 2026.
Although Evoke starts with a 51% share, it can choose to increase this ratio to 100% on the third anniversary of the transaction's completion. The deal requires approval from local regulatory authorities but is expected to be completed sometime in the third quarter of 2024.
"We are focused on our value creation plan, we have no acquisition plans," Widerström firmly stated in the mid-year conference call, but he continued to explain that the company will continue to seek low-capital, high-impact acquisitions and partnerships. Why did Evoke choose Winner?
Considering Romania's long and healthy history in gambling, the Romanian National Gambling Office (ONJN) operates under strict conditions. As of the writing of this article, the website only lists 31 licensed operators, including 888 Romania and New Gambling Solutions (in contrast, the Gambling Commission's register has 2,746).
In addition to Winner, which also owns 14 domains such as Seven, Lady Casino, and Mr Play. If choice is important for Evoke—or relinquishing control of a domain is important for an operator—then New Gambling Solutions and Winner seem an easy choice, as almost all other operators have only one domain.
This business is also well-established. Winner has over 20,000 retail deposit points, and it will continue to operate on the third-party Newton platform, benefiting from highly localized technology, products, and player platforms.
It is also worth mentioning that the current CEO of Winner, Nicklas Zajdel, has agreed to manage the merged business.
"This is an incredibly exciting deal that combines our local brand with one of the most powerful international casino brands in the world," Zajdel said. "Romania is a high-growth market, and this combination puts us on a path to sustainable, profitable, market-leading status. Winner has a strong leadership team, and we are consolidating our success in the market through a highly localized approach as well as competitive advantages such as product platforms, enhanced personalization, and an extensive network of deposit points."
"This also aligns with our acquisition strategy, which focuses on low-capital, high-impact combinations to accelerate the implementation of our strategy," said Evoke CEO Per Widerström. Evoke already has about 500 employees in Romania, and the press release states "this is one of the functional strategic centers of the Evoke Group," which in recent years has been welcomed by some different operators and suppliers. This naturally leads to the next question.
Why Romania?
Evoke confirms that Romania will become its fifth core market, meaning that Romania will join the UK, Italy, Spain, and Denmark as the company's key markets. Evoke states in the acquisition press release: "These markets are large and attractive, the group holds advantageous positions in these markets, capable of achieving sustainable profitable growth. The merged business will leverage its enhanced local expertise to expand market share and strive for a leading position."
Looking back at Romania's gambling history, gambling was legalized in the country after the dissolution of the Soviet Union in the 1990s, and the first casino reopened in 1991. Twenty years later, online gambling was legalized, and ONJN was also established.
Since then, about 500 companies have been licensed by the regulatory authority, helping to establish a thriving gaming ecosystem.
Data from Regulus Partners shows that the market's net revenue is valued at 1.1 billion euros, with a compound annual growth rate of 13% from 2023 to 2026. Over the past few years, several different operators have been closely watching the Central and Eastern Europe (CEE) region. Of course, Evoke is not the only company focusing on Romania. Earlier this year, when Gambling Insider interviewed Soft2Bet's Chief Product Officer Yoel Zuckerberg, he said something similar: "Romania is a competitive market, and we believe we can achieve strong growth here."
From the data, it seems there is huge potential, but if the industry has learned anything from the past few years, it's that huge potential does not always translate into healthy revenue.
So, since all reports clearly indicate that the company is actually seeking to narrow its market, why is Evoke now expanding its business in Romania? In the past year, Evoke sold its businesses in the USA and Latvia, and repeatedly emphasized that its core markets would be the UK, Italy, Spain, and Denmark.
Now, Romania seems to have suddenly taken the stage.
Is Romania a good choice for Evoke?
Perhaps, a more appropriate way to examine this decision is to look at the risks Evoke is taking and the potential consequences.
To obtain a 51% share in the merged Romanian business, Evoke paid a cash consideration of 10 million euros. This is a significant amount, but by comparison, the same company paid 1.95 billion GBP (2.35 billion USD) in 2022 to acquire William Hill.
Therefore, Evoke is not directly acquiring a large company, but rather taking a more strategic approach. The board has said as much.
Widerström said: "Focused on low-capital, high-impact acquisitions to accelerate the implementation of our strategy, this also aligns with our acquisition strategy." Low capital, high impact is key. Winner is already a very mature brand in Romania.
Winner CEO Nicklas Zajdel said: "Winner has a strong leadership team, and we achieve success in the market through a highly localized approach as well as competitive advantages such as product platforms, enhanced personalization, and an extensive network of deposit points." Widerström and Zajdel both pointed out Romania's growth potential, which is also an important factor. The UK, Italy, Spain, and Denmark already have very mature markets, and Romania has only a few operators - Evoke and NGS are among them. If the jurisdiction has as much potential as everyone says, then it is wise for Evoke to use its position in the country to stake a claim in the possible gold rush.
Evoke is very smart in this regard. A low capital of 10 million euros cash consideration has created a merged enterprise that will hold a 7% market share in the developing gambling ecosystem. This hardly feels like a gamble.
Although Widerström was firm in the mid-year conference call, stating: "We are focused on our value creation plan, we have no acquisition plans," he continued to explain that the company will continue to seek low-capital, high-impact acquisitions and partnerships.
Is this a winning move?
Only time will tell if Evoke's approach is correct, but it certainly seems to be well thought out and strategically planned.
Winner is a mature brand, it operates in a market where Evoke has already been conducting business, it has not sold off businesses like in the USA and Latvia, but instead invested 10 million euros to see if it can achieve a substantial capital return. This is exactly what Widerström has been saying, it's low capital, with the opportunity to make a significant impact.
Investors seem to think so too. The Widerström effect continues to accelerate, with the stock price rising 21% over the past month, with a 10% increase just last week. Although we can't see the effects of this acquisition for now, as it won't be completed until the third quarter, it will certainly be interesting to see how many other major operators will also turn their attention to Central and Eastern Europe in the coming months.
