Tipico takes over Admiral Austria from Novomatic: What could be the reason?

Mergers and acquisitions are the order of the day in business. However, some deals are a particular talking point. This is also the case with Novomatic's latest announcement: around 200 betting outlets of the Admiral Group in Austria are to be sold to its German competitor Tipico, which itself operates numerous outlets in the country. Why leave the market to one of its biggest competitors?

The announcement by Austrian gambling giant Novomatic that it would be selling its local sports betting division has caused quite a stir in the industry. Although the deal had been on the cards for some time, not everyone believed that Tipico would actually swallow up ATLAS Group GmbH, the parent company of the ADMIRAL Group in Austria.

Suddenly there is a huge question mark in the air: why is the Austrian gambling giant giving up its home market? Especially when it comes to a leisure activity that is so popular with Austrians that it generates a whopping 3.8 billion euros in revenue every year: We have already shed light on this in our article "Austria: sports betting is a game of skill and therefore largely unregulated".

Of course, Tipico will have dug deep into its pockets for this deal. The "sum" - which Novomatic is politely keeping quiet about - was apparently so tempting that the group was prepared to pull the plug. However, not everyone thinks this is a wise move, especially as sports betting is the third most popular form of gambling in Austria after the lottery and online gaming, according to figures from Statista. However, as Novomatic announced in the relevant press release, the sale is part of a larger strategy:

"The Novomatic AG Group reaffirms this step with a stronger focus on its international business orientation as a global innovation leader in the industry."

The contract has been signed, but approval from the authorities is still pending. It is also unclear whether all Admiral branches and their names will remain. More detailed information is not available. Let's take a closer look at the matter.

Why is Novomatic giving up Admiral in Austria?

We have no insider information, but the matter seems so interesting that it is worth investigating in more detail. Because it sounds almost too strange to be true: Why would a giant like Novomatic simply give up its home market - mind you, in a country that generates billions in annual turnover from sports betting? A closer look shows that there is more to this decision than a generous check from Tipico. The deal between Tipico and the DFB is also likely to have involved a lot of money.

Austria: Small market, big trouble?

As reported by the Kronen Zeitung newspaper, Johann Graf, founder and owner of Novomatic, made it clear years ago that business in Austria was more of a burden for him. According to Graf at the time, the Austrian market was almost insignificant in terms of turnover, but caused a disproportionate amount of trouble.

Tax burdens, bureaucratic hurdles and, last but not least, scandals - such as the filling of positions at Casinos Austria, of which Novomatic was once a co-owner - made for plenty of negative headlines. The allegations of collusion with the government in connection with this personnel policy were a further damper on the domestic market.

Tipico: The industry leader takes over

Tipico, on the other hand, is ideally positioned with over 1,000 betting outlets in Germany and Austria to benefit from the stationary sports betting business. In comparison, the 200 or so Admiral locations almost seem like a niche offering.

While Tipico is fully focused on sports betting, Novomatic has been more firmly rooted in other areas for decades - and that makes all the difference.

No new strategy: sports betting withdrawal from Germany as early as 2020

The exit from Austria fits into a larger pattern: Admiral already withdrew from the stationary betting business in Germany in 2020. The coronavirus pandemic brought a definitive end to this.

As the company announced in a press release at the time, all 17 German locations were permanently closed as the business was simply no longer profitable. It was already clear at this point that brick-and-mortar betting shops were not and are not a focus for Novomatic.

A global player with other leading businesses

Novomatic is an industry giant, particularly in the casino and classic gaming sector. With over 25,000 employees, locations in around 50 countries and exports to more than 120 countries, the focus is clearly on technologies such as gaming terminals, lottery systems and innovative casino solutions: This is underlined once again in the Group's latest press release.

The Admiral Group was only a small piece of the puzzle in this huge portfolio. As we already discussed in our article on Novomatic's rise to become the second most valuable company in Austria, the group's market value is an impressive 3.745 billion euros - a large part of which is probably NOT attributable to sports betting.

An unattractive market?

Regulation in Austria probably also plays a role. Each federal state sets its own rules for betting venues - and although sports betting is not officially considered gambling, the bureaucratic burden remains high.

Licensing procedures, different regulations and high taxes make the business complicated. Tipico, whose business model is based on sports betting and stationary outlets, can presumably operate more efficiently here than Novomatic.

Source of the image: https://pixabay.com/illustrations/ai-generated-businessman-corporate-9180037/

Central text sources: https://www.novomatic.com/explore-novomatic/presse/pressemitteilungen/novomatic-und-tipico-unterzeichnen-vereinbarung-ueber, https://www.krone.at/3646905, https://de.statista.com/themen/2928/gluecksspiel-in-oesterreich/#topicOverview, https://www.loewen.de/gruppe/presse/alle/admiral-sportwetten-zieht-sich-aus-dem-stationaeren-markt-zurueck-504/