Over the past few years, the M&A sector has grown exponentially, with online gaming companies being a primary target for investment and / or cross-border regulatory requirements. The gradual opening of the US states to the regulation and licensing of online gambling was undoubtedly a major driver of increased M&A activity, motivated by (a) financial reasons for them to immediately generate high revenues from consolidated financial statements, (b) regulatory Requirements to demonstrate ownership of fully functional approved platforms and (c) technological reasons to piggyback on the proven platforms and games to take to the streets. The interest of US firms in European companies, the former traditionally active in the land-based space, also had an impact on other M&A firms, in particular the merger of European online gambling groups (possibly also more attractive to US firms).
With Malta likely having the largest register of licensed online gambling companies that are part of larger pan-European groups, M&A activity has kept the Malta Gaming Authority (MGA) quite busy reviewing any mergers or acquisitions that MGA licensees are directly or indirectly involved in were involved. The framework for gaming approvals and compliance, including Guideline 3 of 2018, regulates the reporting and transmission obligations in the event of changes to the “qualifying shareholding” or the “qualifying share” in an MGA license transaction. The framework is based on an “ex-post” model, ie the MGA does not issue approvals prior to the transaction, but the licensee is legally obliged to report changes to the qualifying participation or participation within 3 days of such a change to the complete documentation to submit the change within 30 days and pay a processing fee of 1,500 euros.
The advantage that the transfer of shares does not require prior authorization is that such transactions can be carried out quickly, but the operators involved in such transactions must be very careful not to jeopardize their license, as they are responsible for the timely Submission of the transaction appropriately and that the new entitled shareholder goes through the MGA fit and property and source clearance is borne by the licensee alone. If clearance is not given, the second worst enforcement action that the MGA can impose (after the license is revoked, which is of course the worst consequence) is for the MGA to order the transaction to be reversed.
In this context, it is of fundamental importance that for every M&A in which a Maltese licensed company is directly or indirectly involved (since the acquisition would take place at the level of a group holding company in a different EEA jurisdiction), professional support and Advice in order to:
- plan the transaction from a gaming perspective,
- pre-checking buyers and their source of funds,
- ensure that regulatory notices and filing milestones are met, and
- to ensure that the share purchase agreements contain the necessary safeguards to counter the regulatory risks.