KPMG in the Isle of Man & Gibraltar recently won the prestigious B2B eGaming Review Magazine award for Corporate Service Provider 2016.
Key members of the eGaming team at KPMG Isle of Man and Gibraltar explain how professional service advisors add value while managing risk and reputation in the eGaming industry.
KPMG was one of the key enabling corporate service providers in the early days of the emerging eGaming sector. What was it that attracted KPMG to the eGaming sector and how have you become so successful in the eGaming space?
RK: You’re right, KPMG has been providing professional services to online gaming businesses since way back in 2002. It was in 2010 however that we really became known for our work in the sector.
Our then Head of eGaming, Archie Watt, co-authored an influential report called Online Gaming: A Gamble or a Sure Bet which analysed the current state of the industry and identified the huge opportunities which existed, such as the large unrealised markets, the easing of regulation in many areas to allow online gambling and the potential for mobile technology to enhance the user experience.
MS: That same year KPMG held our first eGaming Summit in the Isle of Man with the threefold aims of signalling our commitment and interest in the sector, providing thought leadership and guidance and educating those outside the sector about the nature and direction of eGaming.
I think it is our willingness to really understand the mechanics of the sector, and work with the participants in it to build credible, compliant, reliable and trustworthy businesses, allied with our long and respected experience in financial services that has made us a natural choice for so many operators.
The KPMG eGaming Summits in the Isle of Man and Gibraltar have been hugely popular events. Why do you think they are regarded as such important dates in the eGaming calendar?
JT: I knew about the eGaming Summits long before I joined KPMG in 2015, as a great forum for all the key players in the industry to get together, discuss the developments, issues and regulatory matters that are impacting either positively or negatively on their businesses and share experiences for the common good.
AK: As with many young industries, the pace of change in eGaming is fast so having an opportunity to regularly catch up and consider some of the challenges, successes and failures is really helpful.
The Summits are also free to attend so even smaller businesses can reap the benefits of being there and networking with the top shakers and movers in the industry.
Both the Isle of Man and Gibraltar events are very well-attended, by the operators based there and others who fly in for the event, and we’re looking forward to helping our colleagues launch a Malta summit in November 2016.
What are the key services KPMG provides to the eGaming industry?
CS: Aside from the eGaming Summits, most people will know KPMG through our auditing services – and it is this enduring commitment to providing a quality audit that underpins everything we do.
We believe it is essential to have a deep understanding of a business for us to be able to offer impartial advice and insight to our clients, and to deliver trustworthy and transparent financial information.
RK: As Head of Audit for our Isle of Man and Gibraltar offices, I oversee a team of 10 in our eGaming section and we undertake audits for a number of leading eGaming companies and their service providers.
But while it is at the heart of our business, audit is not the only service we provide by any means. Other key areas include advising on private and public market transactions (mergers, acquisitions, IPOs, refinancing etc), advising on the impact of new technology and IT systems, risk consulting on compliance and regulatory matters, people and change consultancy, and remuneration benchmarking.
SS: The sector has also had a number of challenges to face in terms of changes to direct and indirect taxes, and we have been proactive in assessing the impact and advising the industry on proposed changes, not least HMRC’s current proposals which I am working closely with my UK colleagues to assess and address.
As a global organisation we focus on quality and excellent service, bringing different perspectives, sound judgement and multi-disciplinary collaboration to provide innovative approaches that deliver real results for our clients.
There has been a spate of mergers and acquisitions recently in the eGaming sector. Do you foresee more consolidation in the future?
KK: There has indeed been significant M&A activity in the past few years between operators and in the supporting supply chain. We were involved in the recent Paysafe aquisition of Skrill and its move to a main market listing on the London Stock Exchange as an example.
Consolidation is occurring as a means to accessing new markets and to add scale whilst leveraging operating costs. Also the extended regulation of gaming markets has increased the breadth of investors willing to participate in the market, helping to drive M&A activity.
DK: IT development and differentiation is a massive factor in eGaming, allowing for more exciting products and improved mobile access all the time, so some M&A activity may be as a result of businesses recognising there is an argument for spreading cost over a wider portfolio, or diversifying into other areas to maximise their investment.
DA: There are also all the regulatory issues, not to mention the continually moving taxation landscape for the sector, that can suddenly make one location much more appealing or restrictive than another, plus eGaming seems to be attracting more interest from private equity than we have seen for some time. So I think we will continue to see a lot of activity in the coming years.
What other opportunities and challenges do you think lie ahead for those involved in the eGaming industry?
LH: One of the recurring topics at our Summits is the likelihood of increasing regulation and the impact this may have on the market. At the moment there are varying approaches to regulating eGaming depending on which jurisdiction you look at and it is likely some will become more stringent or introduce levies which may have serious implications for some businesses.
RK: But it is equally clear that there is still a growing demand for online betting in all its forms (with perhaps the exception of poker which is close to reaching saturation point) and that with more consumers becoming ready to embrace mobile technology, there is still huge potential.
The industry winners are likely to be those businesses that understand their market and focus on their customer, but also understand the need to be well-regulated, compliant and trusted.
LH: I think that’s right and one element that will become more important is the need for businesses to demonstrate and implement strong player protection measures.
DK: Those who can harness technology to provide an entertaining and easy way to play and pay will continue to have an advantage, especially in new emerging markets outside Europe and the US.
MS: But maintaining a good reputation will be essential for all those working in the industry, something that we hear time and again at the eGaming Summits and something that, in our role as professional services advisors, we cannot stress highly enough.
MS - Micky Swindale, Head of Advisory
RK - Russell Kelly, Head of Audit
JT - Jon Tricker, Audit Director
SS - Sandie Skuszka, Head of Indirect Taxes
KK - Kristan King, Head of Deal Advisory
DA - Darren Anton, Tax Senior Manager
CS - Chris Shimmin, Audit Manager
LH - Lawrence Hanlin, Risk Consulting Manager Advisory
DK - Dan Kniveton, IT Advisory Manager
AK - Abby Kimber, Marketer
© 2018 KPMG LLC, an Isle of Man Limited Liability Company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.