In a bid to boost its array of technological services and capabilities, Kambi Group plc is acquiring Danish B2B and iGaming developer Shape Games for $38.45 million in an all-cash deal.
The acquisition also includes a performance-related earnout that could bring the final purchase price to $78 million, contingent on additional earnings that Shape may bring to Kambi.
Kambi is a leading legal sports betting platform developer whose Kambi Sports Solutions division is licensed and regulated in the UK. Kambi Group's 40-plus customers include ATG, Churchill Downs Incorporated, Kindred Group, LeoVegas, Penn National Gaming, and Rush Street Interactive.
The acquisition will allow back-end provider Kambi to take better advantage of Shape Games’ front-end B2B platform technology that will enhance Kambi's existing sportsbook and iGaming products. Kambi will also be building on existing partnership arrangements with Shape that have seen the junior outfit provide tech services to Kambi clients BetWarrior and JACK Entertainment.
"I’ve always been clear on our intention to acquire technology and talent that will complement and enhance our sportsbook proposition, and I have no doubt Shape Games will do just that," said Kristian Nylen, CEO and co-founder of Kambi, which has more than 1,000 employees based principally in Malta (headquarters), Sweden, the UK, and the U.S.
"[Shape Games'] technology enables operators to extract the full value of the Kambi sportsbook and provides the level of control operators require to deliver bespoke experiences to their players," added Nylen. "It is the ability to offer a combination of Kambi's and Shape Games’ technology to our partners [...] solidifies our position as the clear leader within the sports betting ecosystem."
Shape Games CEO Christian Risom echoed Nylen's belief in the synergies that will derive from a closer integration of the two companies' operations.
"We are very happy to join forces with the leading sportsbook provider of the industry. Shape Games and Kambi have been working closely side-by-side for years now and it is exciting to take this partnership to new levels," said Risom. "Together, we will have an unmatched sports betting and casino offering for any market in the world, be it on mobile and web or in retail."
Kambi eyes expansion in US market
One of the key components that triggered the deal is Kambi's expectation that Shape will "significantly enhance" its range of B2B products in the online sports betting sector, which is the source of "the majority of sportsbook turnover."
According to Nylen, Kambi needs to ramp up its technological capabilities to meet the growing demand from U.S. operators for unique and differentiated mobile wagering platforms in a fiercely competitive environment.
Risom agrees on the value in targeting a U.S. sports betting market, which is experiencing double-digit growth and will continue to see sportsbooks spend heavily to gain market share in newly launched (and soon to launch) states such as Kansas, Maryland, Ohio, and Massachusetts.
"The world of online sports betting is changing. In the future, it will be the US market that drives innovation for a large part. The US is also a mobile-first market, which is perfect for our solution," said Risom. "Kambi is already a very successful player in the US market with many milestone deals, including an existing shared customer [JACK Entertainment]. All this combined makes Kambi an obvious partner to ensure maximal future success."
Horizontal tech integration
In a Q&A session that followed last Thursday's announcement of the deal, Nylen explained in greater detail how the Shape Games acquisition effectively served to horizontally integrate front and back-end sports betting tech.
"The front end is a crucial part of the sports betting value chain, key to engaging and retaining players," said Nylen. "Moreover, as sports betting regulation continues to expand across the US and further afield, some of the differences in player expectations can be stark.
"Therefore, providing the native front-end capability that offers a high level of flexibility to localize to each market will be key to us continuing our global success."
Headquartered in Copenhagen, Shape Games was founded in 2018 by Risom, Chief Product Officer Nicolas Linde, and Chief Technical Officers Ole Gammelgaard and Philip Bruce, all of whom will remain in their positions within the newly constituted Kambi Group.
Shape is one of the industry’s leading front-end tech providers. Some of Shape Games' major European tech clients include RedBull, Bang & Olufsen, Credit Suisse, Danske Spil, and Norsk Tipping. In 2021, Shape Games reported earnings of $7.6 million and has forecast that 2022 revenue will double as a result of several major partner/customer additions.
Under the terms of the deal, Shape Games will still be providing its services "on a standalone basis to all operators." These operations will run in parallel with Kambi's platforms, which will be upgraded by integrating Shape tech and thus providing enhanced services to existing and future Kambi customers.
"Our background from working with big consumer brands on products used around the globe has given us a lot of experience creating first-class products," said Risom. "We have always focused on delivering the best experience possible on the device, and that means native software development. This has given us a significant head start when building flexible and user-friendly native products for the gaming industry."
Kambi live in Arkansas
The Shape Games deal follows the August announcement by Kambi that it had entered into an agreement with Oaklawn Racing Casino Resort in Arkansas to provide retail and online sportsbook solutions to one of the premier thoroughbred racetracks and casinos in the state.
Kambi will provide digital betting technology to Oaklawn, including Bet Builder (Kambi's award-winning same-game and multi-game parlay product), allowing Oakland to launch its online sportsbook in the coming months.
The agreement replaces a previous partnership that Kambi has signed with Churchill Downs Inc., which saw Kambi launch its retail sportsbook at the Oaklawn Casino in 2021.
In its most recent earnings report for Q2 2022, Kambi Group announced that revenue fell to $34.65 million — a 19% drop year-over-year — while earnings totaled $71 million for the first half of the year.
