Christian Tirabassi, an expert in mergers and acquisitions, said that Brazil's high obstacles to entry, tax rises, and marketing restrictions will certainly make it exceedingly hard for smaller businesses to compete.
Market for betting in Brazil
Christian Tirabassi, the founder and senior partner of the M&A consultancy firm Ficom Leisure, says that Brazil's betting market will be dominated by 10 to 12 top-tier operators. Tier two and three operators will have a hard time competing because of the high obstacles to entry.

Brazil's online market opened on January 1 with 14 full licenses. Since then, the Secretariat of Prizes and Bets (SPA) has given clearance to over 80 more operators, bringing the total number of legal operators to roughly 80.

But even though these businesses have previously fulfilled the high obstacles to entry, like the BRL30 million ($5.5 million) licence fee, some people think that the exorbitant costs of staying in compliance could force smaller operators out of the market.

If the gambling tax goes up from 12% to 18% of GGR and there are greater advertising limitations, the market will probably look like more mature European markets, where a few big companies control most of the market share.

Tirabassi tells iGB, "The companies that were strong [performers in Brazil] before the regulation are realistically keeping that leadership position."

"The only one that has a distinct strategy is the joint venture between MGM and Grupo Globo, which is [new to the market]. The rest are brands that are still around, like Betnacional, which Flutter bought.

"Ten to twelve operators, or thirty brands, will control most of the market. "Below a certain level of GGR, the [operators] will have a hard time [competing]."

According to H2 Gambling Capital, By 2025, Brazil's online gambling sector might make BRL31 billion ($5.5 billion) in GGR. By 2030, it could make BRL64 billion. This doesn't take into account how a tax hike would affect things.

Regional operators could be able to stay in business
Tirabassi thinks that larger companies would dominate the industry, but he also thinks that smaller companies could keep a decent market share if they can discover a niche.

Tirabassi goes on to say, "This could be a regional niche." "Not a national operator, but maybe an operator that has a good market share in a certain area for some reason."

"But the numbers would be a lot smaller than those that go for national market share, like Bet365, Flutter, and EstrelaBet. These are the kinds of guys who make over BRL200–300 million GGR a year."

Getting new customers is hard because of new advertising rules.
Because it costs so much to do business in Brazil, smaller companies are likely to have a hard time. Recent events may make things much worse for these enterprises.

The Senate passed new rules in May that limit the use of athletes and influencers in ads and set limits on when ads can run. The new tax rate, which is 50% higher than the current one, will make it even harder for operators who are already having trouble competing.

Tirabassi thinks that over the next 18 months, companies will spend more than $2.5 billion on marketing in Brazil as they try to compete in the new market. Most of the money is likely to come from bigger companies that want to get ahead of new ad rules.

Tirabassi says, "We thought there would be some limits." "Before that happens, businesses will flood the market."

"They will do everything they can to get the biggest share of the market." And when those rules do come into effect, they will already have a big piece of the market that they might keep.

Possible problems with M&A activity in Brazil
Tirabassi thinks Brazil will become the hottest M&A market in the history of LatAm gaming. This might give smaller operators a chance to sell their businesses for a profit or work for a bigger company.

Tirabassi tells these independent operators to make sure they have all the business needs in place to make a possible sale easier. He has seen that operators can have difficulty when there isn't a clear organisational structure.

Tirabassi says, "What we've seen is that if you have a very large business with a [tiny] corporate structure that doesn't match the size of the business, that's where [operators] will have to catch up."

He says, "They've been following the rules and regulations for the licence, but they need to have a CFO and a real corporate adviser look over their numbers so they're ready for due diligence and so on."