Playtech's swift foray into the retail trading market may have come as a surprise to many industry insiders. But for the gaming giant, it was part of a clearly defined strategy. "Playtech has a stated strategy to acquire profitable, regulated, highly cash generative businesses with market-leading positions," says Ron Hoffman, Playtech veteran and newly appointed CEO of TradeFX.
Read Finance Magnates' special analysis of Playtech's strategy
In their first interview since the approval of the Plus500 deal by shareholders, Mr. Hoffman and Omer Shvili, Founder of Markets.com, discuss the latest moves by Playtech and share the group's plans in the retail Forex market.
For them, the common thread of Playtech's acquisitions was the synergy that they were able to create: Markets.com has been excelling with its customer acquisition and client retention strategy; Plus500 has created proprietary technology including its automated marketing machine and Trading Platform ; AvaTrade provides Playtech with a solid client base and a lucrative Japanese Financial Services Authority license.
These synergies are believed to be the future growth model for this business segment for the company. According to Hoffman, “The financial space is driven by the same core competencies, and therefore Playtech can leverage its expertise in the areas of technology, marketing and customer retention, and enjoy its extensive operational and financial backbone.”
“The recent acquisition of TradeFX has given Playtech immediate access to this vertical through scale and position and is a natural aggregator of businesses within this sector,” he elaborated.
Greasing Plus500's Marketing Machine
Ron Hoffman
The dramatic announcement about the bid for the ailing Plus500, including raising additional funds and acquiring a preliminary 9.36% stake of the firm, caught many off guard. Mr. Hoffman explains that on top of the above mentioned synergy and the opportunity created by the massive share drop, a major advantage for Playtech was its acquaintance with the Israeli-based FX and CFD broker.
“The team over at TradeFX has known Plus500 quite well for several years, and we had the advantage of being able to conduct extremely quick due diligence, which allowed us to take advantage of the unique opportunity that presented itself."
The team has known Plus500 quite well for several years, and we were able to conduct an extremely quick due diligence
In regards to the synergies with TradeFX, Mr. Hoffman cited, "While Plus500 has the industry leading marketing machine and mobile offering, TradeFX focused its technology development on CRM and retention tools." He added, "The combination of both technologies and products will create a best of breed offering, that will allow the group to out-convert all competitors, while maximizing customer lifetime value in the different markets it operates."
While seeing the two brokers' strongest capabilities as "complementary", Mr. Hoffman makes it clear that from a marketing perspective a fusion of them into a single mega-player will not make sense. "We see each of them having different market reach and intend to leverage the strength of these brands in their respective markets," he says.
One implication of this decision is the parallel high profile football partnerships of Markets.com and Plus500 (with Arsenal and Athletico Madrid respectively), the latter having just been extended. Despite the high profile and media attention these deals get, for Playtech the "vast majority of marketing spending is done, and will continue to be done, via online and mobile platforms, where the companies’ advanced technologies allow them to outperform the competition."
What Does Markets.com Brings to the Table?
Omer Shvili
The Markets.com brand has found a natural home under Playtech’s umbrella according to the broker’s founder, Omer Shvili. "Playtech’s ability to power retail financial businesses with the firm’s user acquisition and CRM capabilities, product expertise and scale, is putting the company into a position of strength," he said.
Our goal will always be on delivering shareholder value and would always look at the best possible way to maximize this
Elaborating on the broker's platform offering, Mr. Shvili commented on the Markets.com partnership with Leverate, “While it is still an available offering, it is becoming less relevant and supports only a small part of the activity as we are highly focused on our own in house solution.”
He also explained that forex has become less relevant when compared to the broad picture, as more clients have been interested in trading other asset classes such as commodities, indices, shares, etc. Mr. Shvili stated, “FX is still and will remain a key asset class going forward,” adding, "Our goal is to eventually offer CFDs on almost every available financial instrument that is quoted somewhere around the world. By increasing our product offering, we will make our service relevant to a bigger potential audience."
Is the Next IPO in the Making?
With the acquisition spree by Playtech turning heads across the industry and roll up of the multiple trading brands into one unit, it begs the question as to whether this is the prelude to a potential spinoff of the brokerage unit. Answering this, Mr. Hoffman explained that the company would rather focus on how to properly integrate the businesses it recently acquired to make use of the significant synergies that can be achieved throughout the process.
Nevertheless, Mr. Hoffman didn’t rule out anything, stating, “Our goal will always be on delivering shareholder value and would always look at the best possible way to maximize this.”
Future Synergies?
Looking at the future and in light of recent reports, Finance Magnates felt they had to ask Playtech’s executive about further deals in the pipeline. IronFX, struggling in the aftermath of a deposit withdrawals issue by numerous clients, was seen as a good fit for Playtech, which has committed to the retail financial trading industry.
We have already looked at several businesses on top of the ones we have made public, some of which have been picked up by the press
On this subject, Mr. Hoffman answered: "Following the recent acquisition of TradeFX, we would expect to be highly acquisitive as a natural aggregator in the Financials space, as evidenced by the recent offers for Plus500 and AvaTrade. We have already looked at several businesses on top of the ones we have made public, some of which have been picked up by the press, and we will continue to look at other similar businesses."
