According to information from Datahub, a market data and information platform, the sector’s revenue more than doubled in 2023, reaching around R$ 120 billion (US$ 23.7bn) per year.
“The sector has been growing exponentially since 2018 when Law 13,756/18 was approved, legalizing online sports betting in Brazil. But now, with the market regulation following the sanction of Law 14,790/23, the expectation is to attract investments from large national and international groups, as there will be more legal security for operations,” explains economist Adam Patterson, partner at Redirection International and one of the responsible for the study.
Law 14,790/23 was sanctioned at the end of 2023 and regulates fixed-odds betting, known as Bets, in which the bettor knows the rate of return at the time of the bet. The text taxes companies and bettors, defines rules for the exploitation of the service, and determines revenue sharing. The regulation of the new legislation is expected to be completed by July according to information from the Ministry of Finance.
“With the new regulatory framework and the launch of the governmental market for sports betting, Brazil is poised to become one of the largest online sports betting markets in the world. The country already has the highest number of users on sports betting websites. In 2022 alone, Brazilians visited betting portals 3.2 billion times, all in a market still without consolidated regulation,” highlights Patterson.
According to data from Aposta Legal Brasil, 80% of Brazilians who play on online platforms in the country bet on football. Next are esports and basketball. Datahub estimates that there are currently more than 450 sites in operation in the country.
In addition to sector regulation, other factors driving the market are technological advances and internet access, diversity of companies and sports, different types of betting options with the possibility of smaller bets and facilitated payment options.
Mergers & acquisitions
With the regulated online sports betting market, the expectation is that there will be more opportunities for operators, suppliers, and global investors, with international giants like Flutter, bet365, and Entain seeking to increase their market share in Brazil through corporate development and M&A strategies.
“We see great potential for a boom in M&A activity in the sports betting sector, a universe where Brazilian passions for sports and technology are combined. The trend for M&A activities is partly driven by substantial regulatory costs associated with the licensing process, including authorization fees that can reach R$30 million (US$ 6m), technical certifications, and tax obligations. Collectively, these factors represent a significant challenge for the economic sustainability of small betting operators,” warns Patterson.
Despite still being in its early stages, the market already records some M&A movements, such as the acquisition of Torcedores.com by Better Collective last year and the acquisition of Grupo Loyalty by Esportes da Sorte in early 2024.
Patterson explains that although there is likely to be increased competition from global companies, local operators in Brazil’s sports betting market can successfully compete using a variety of strategies, including mergers and acquisitions and joint ventures.
“It is expected that the legal requirement for companies to have a Brazilian shareholder to obtain an operating license will foster mergers and acquisitions here in Brazil. The number of sites and companies may decrease, as happened in Colombia, but we can expect significant changes, ranging from marketing, new technologies, to large-scale implementation of private capital investments, as well as access to capital markets, including future initial public offerings,” he says.
To present the opportunities of this market to foreign investors, Redirection International will hold an event on May 21st at the Brazilian Chamber of Commerce in Great Britain. On the occasion, the company’s associate in London, Simon Davis, will speak about the new legislation to entrepreneurs and investment funds from the UK. More information, here.
Redirection specializes in Mergers & Acquisitions advisory for local and international companies in middle-market transactions. It has extensive experience in cross-border transactions, with a team operating directly in Brazil, Latin America, the United States, and the United Kingdom. It is a member of ACG and also develops a network of selected partners in all major business sectors and regions of the world.
Source: Redirection