The past couple of years saw an exponential increase in the mergers and acquisitions (M&As) space, with online gaming companies being a prime target for investment and/or cross border regulatory requirements. The incremental opening of US States to the regulation and licensing of online gambling was without a doubt a prime mover for increased M&A activity, motivated by (a) financial reasons for them to immediately record high turnover levels from a group consolidated accounting point of view, (b) regulatory requirements, to demonstrate possession of fully functional approved platforms and (c) technological reasons so as to piggy back on the tried and tested platforms and games in order to hit the road running. The interest by US firms in European outfits, where the former traditionally operating in the land based space, also had a ripple effect on other M&A’s, particularly seeing European online gambling groups merging (also possibly to be more attractive to US firms).
As Malta probably has the largest register of online gaming licensed companies forming part of larger pan-European groups, the M&A activity has kept the Malta Gaming Authority (MGA) quite busy in screening mergers or acquisition which directly or indirectly involved MGA licensees. The Gaming Authorisations and Compliance framework, including Directive 3 of 2018, address the notification and submission requirements when there are changes in the ‘qualifying shareholding’ or ‘qualifying interest’ in an MGA License operation. The framework is based on an ‘ex-post’ model, meaning that no pre-transaction approvals are granted by the MGA, but the licensee is obliged at law to notify any changes in qualifying shareholding or interest within 3 days from such change, to submit the full documentation pertaining to such change within 30 days and to pay a processing fee of Euro1,500.
The advantage of not requiring a prior approval for the transfer of shares is that such transactions can happen swiftly, however the operators involved in such deals need to be very careful not to compromise their license, as the responsibility that the deal is communicated in time, appropriately and that the new qualifying shareholder passes through the MGA fit and proper and source of funds clearance, is solely borne by the licensee. Should clearance not be granted, the second worst enforcement action that the MGA can impose (after the cancellation of the license which of course is the worst consequence), is that the MGA can direct for a reversal of the transaction.
In this context, it is fundamental that for any M&A which involves directly a Maltese licensed company, or indirectly involves the Malta company (as the acquisition would be happening at a group holding level in another EEA jurisdiction), to have professional support and guidance in order to:
- plan the transaction from a gaming regulatory point of view,
- pre-screen the buyers and their source of funds,
- ensure that regulatory notification and submission milestones are adhered to, and
- to ensure the Share Purchase Agreements include the necessary safeguards to address the regulatory risks.
Our team of experienced M&A transaction lawyers and regulatory advisors can provide the professional support and advice required to see the deal go through. Should you need assistance in an M&A transaction you can contact our M&A partners, Dr Ian Gauci, Reuben Portanier, Dr Ivan Gatt or Dr Robert Tufigno.