Paddy Power Betfair pays $48 million for US-based DFS company
Paddy Power Betfair made a big splash in both the DFS and U.S. market yesterday when it announced the acquisition of DRAFT, a mobile-focused fantasy sports operator that launched in 2014.
The agreement calls for Paddy Power Betfair to pay $19 million upfront and an additional $29 million in potential payments over the next four years contingent on future results. Read the official press release here: https://www.gpwa.org/article/paddy-p...f-draft-221336
Reaction from Legal Sports Report:
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The purchase is an expression of PPB’s belief in the DRAFT product, approach, and team.
Despite an operational history stretching back over two years, DRAFT is a relatively minor player in the fantasy sports space in terms of liquidity.
In fact, several DFS platforms with superior liquidity and user bases have been available for purchase in the last 12 months. All were available at prices that amounted to a fraction of what PBB paid for DRAFT. Many of those platforms failed to find a buyer and ultimately shuttered.
In contrast, PPB paid an upfront multiple that I’d ballpark at 10x+ revenue for DRAFT. I’d be surprised if DRAFT was profitable.
DRAFT founder Jeremy Levine told Forbes.com:
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"I think [Paddy Power Betfair] saw our game and the kind of user experience and the team and realized we were in a really good position to quickly take market share . . . Everyone else kind of offers the same salary cap game. We learned the downfalls of it and how hard it is for casual fans to win. Tens-of-millions of people want to play fantasy sports and many of them have realized they have little chance of winning with FanDuel and DraftKings and other salary cap games."
While this may seem like bad news for DFS giants DraftKings and FanDuel, Legal Sports Report points out that it may actually benefit them because:
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- The chances that DRAFT cuts materially into the player base or revenue of DraftKings or FanDuel are relatively slim, even with PPB’s backing.
- The acquisition of DRAFT breathes a bit of life back into the besieged vertical.
- The acquisition is also a compelling argument for federal approval of the pending merger between DraftKings and Fanduel. The willingness of a major company such as PPB to place a substantial bet on the market despite the threat of competition from a combined DraftKings / Fanduel is a powerful counter to antitrust concerns.
