In a move that could be the first of many, sports data and technology specialist Genius Sports Group (GSG) is set to be listed on the New York Stock Exchange after agreeing a US$1.5 billion merger with special purpose acquisition company (SPAC) dMY Technology Group II.
Following the transaction, which is expected to close in the first quarter of 2021, the newly combined, publicly listed entity will have ‘a substantially debt-free balance sheet’ and an estimated US$150 million of ‘unrestricted’ growth capital, which will be used to ‘accelerate its US and international expansion through organic growth and strategic acquisitions’.
It is thought that the move is the first sport-related SPAC deal involving a UK company, with London-based Genius Sports, which was founded in 2000 and distributes official data for a host of top sports properties to bookmakers around the world, set to use the fresh injection of capital to fund its expansion into key markets, including the United States.
Following the announcement, SportsPro caught up with Genius Sports chief executive Mark Locke to discuss a transaction which he says will “supercharge” the growth of the business and help strengthen its position as a global leader in the sports betting space.
First things first, how did this deal come about?
We’re advised by a very innovative business called Oakvale Capital who put us in touch with dMY’s principals, Harry You and Niccolo de Masi. Really they understood what we’re trying to achieve, which is to have the ability to have ready access to capital and to accelerate the growth opportunities that we see available to us in the United States and other emerging markets. It was a natural fit for us to follow this path.
Why go public now, why go the SPAC route rather than filing for an IPO, and why list in the US rather than the UK or elsewhere?
We’re a truly global business. The European market is one of our strongest areas, but the US has a very, very exciting growth opportunity presenting itself, as I’m sure you’re aware. The opportunity to become a listed entity and to access both the investor base and the capital, and have that freely tradable paper, is something that is very attractive and very quickly achieved through a SPAC listing.
One of the problems with traditional IPOs is the length of time they take and ultimately what that means is the amount of distraction for management teams. It takes a lot of time and effort and management teams are often distracted from the core goals of actually running a business and executing a strategy.
What we saw from the SPAC transaction, and the partnerships that we have in the States and the investor base, is we were very rapidly able to execute the transaction and position ourselves with all of the same benefits of a traditional listing. Ultimately it’s the same but having gone through a much faster process, that allowed us to continue executing on the business.
We now have the firepower, we now have all of the tools that we need in our armoury to be able to go and execute.
This deal grants you US$150 million in growth capital for international expansion and strategic acquisitions. Where or how exactly will that money be spent?
It’s a great question. The growth capital presents us with two opportunities, really. One is to continue to invest in the organic development of the business. We’ve got a great track record of being very capital efficient, making really sensible, long-term investment decisions, and the growth capital really just allows us to accelerate and invest a little bit faster in those core areas that we’ve identified and we’re already investing in at the moment. That’s exciting, and it’s almost like supercharging our business.
The other thing that I really like is the fact that the cash and indeed the paper that we get through the transaction allows us to go and make acquisitions of businesses, whether they’re small, innovative technology companies that are trying to achieve the scale and distribution that we can provide them with, or whether they’re much larger, transformational acquisitions.
We now have the firepower, we now have all of the tools that we need in our armoury to be able to go and execute a wide range of transactions of all sizes.
What excites you most on the M&A front?
Obviously I’m not going to go into any detail on specific acquisitions, but really what we’re looking for is innovative technology companies that accelerate our core strategy. We’ve got a very well defined, very well executed strategy. We work in partnerships with sport, we promote official data, we think it’s the key focus that the businesses in our sector are going to have over time.
We’re able to execute that strategy as we are, however there are many different types of technology companies, such as businesses in AI or computer vision, that we can use to complement the existing products and services that we have in our business, and to really propel us forward.
Besides the US, in which markets do you see opportunities for growth internationally?
We, as a business, have always been focused on regulated markets and developing markets, and that really is not going to change. There are a lot of interesting areas, lots of interesting things going on in South America, going on in Germany, so as a business we’re well-placed to help our customers achieve their goals as those markets continue to regulate and develop.
Covid was a difficult time for lots of businesses and we all made sacrifices, but ultimately we still grew almost 25 per cent.
You’re projecting group revenues of US$190 million for 2021. To what extent is that figure contingent upon the wholesale return of live sporting events next year?
The revenue model that we’ve got is something that we feel very confident [about] and is very achievable. As a business we’ve got a really good, strong history of consistent growth. We’ve been known to always achieve our growth objectives and to really deliver shareholder value, and the numbers that we’re projecting forward are the result of us undertaking the same process as we always have done.
Covid was a difficult time for lots of businesses and we all made sacrifices, but ultimately we still grew almost 25 per cent during the Covid period and that’s shown our business to be very resilient and very strong and ultimately extremely well structured to continue to deliver value at all levels.
To what extent do you expect the streaming side of your business, which currently accounts for just one per cent of total revenue, to increase in the near future?
Streaming is a very interesting market. We’ve got an innovative business model, which is about partnering with sports leagues and federations on a long-term basis, adding value to them, and streaming is really another part of our package where we can help those sports leagues and federations achieve their goals and bring their streaming online.
We’re extremely well structured for life in the public markets.
What are some of the key operational or structural changes that will take place as part of going public?
Ultimately the business is extremely well run. We’re currently private equity owned by Apax, which is a huge private equity firm. They bought into us a couple of years ago and as such we’re extremely well structured for life in the public markets.
We don’t foresee any material changes. Obviously there are going to be some bits and pieces around US reporting and some of the natural stuff that comes with being a listed company, but ultimately the business that we have is extremely well positioned for growth. It’s part of the reason why we made the decision to do this; we wouldn’t have done it unless we knew we could manage and execute in the public markets and deliver value to shareholders on an ongoing basis.
The emergence of sports-focused SPACs is something of a hot topic right now. Do you expect to see other businesses taking a similar route, and what would be your advice to other sports organisations looking to go public in partnership with a SPAC?
I think the SPAC route is entirely sensible. As I said, the main problem that you face, as a management team trying to execute material transactions, is getting distracted from your core business and your core goals. A SPAC transaction, whilst it has its overhead and does, of course, take up a lot of management time, it is a much less distracting thing for a business to undergo, and as such I think that’s very important.
What advice would I give? The key thing about a SPAC transaction is making sure you choose your partner. Knowing that your partner can add value, that they’re the right people, that they’ve got access to the right investor base, that they’ve got the ability to actually help your business accelerate and grow, and provide you with value-added services over and above just the transaction, is really important.
We feel very fortunate to have met Harry You and Niccolo de Masi and the dMY guys, and again having the advice of Oakvale Capital helping us through that transaction has been an incredibly valuable experience. We feel very good about it going forwards.