is betfair an exchange or a bookmaker?? don;t see how it can be both??

what are the rules on how long they're barred from bidding again for?

"management didn't buy into Koch's radical plan to focus on big exchange customers"

Can someone please explain this comment.  If the firm was taken over, surely the management would be replaced anyway.  Isn't it up to shareholders whether to sell or not, not up to the management?

Might pan out that way in due course

And to do that you need liquidity and variety.  That is the biggest problem facing the exchange imo.  For a while now there's been a core of markets that have got bigger, while layer upon layer of other markets dissolve away.  The layer gets nearer and nearer to the core every year.  It might be a cycle that can't be broken.

At 5pm on Monday evening, all seemed still to play for in the great Betfair takeover stakes.

Those private equity raiders from CVC had already raised their proposed offer for the betting exchange operator three times, up from 880p a share to 920p and then, on Sunday night, to 950p.

CVC had declared the last one, valuing Betfair at £990m, “full and final”. But, despite that, Betfair chairman Gerald Corbett had given CVC one more chance to “further improve” its proposal. The hint was that the board might play ball at something close to £10, even 975p.

To help CVC get there, Betfair put up new chief executive Breon Corcoran and chief financial officer Alexander Gersh. On Monday they met CVC’s UK boss Rob Lucas and a London partner, Pev Hooper, at the offices of Betfair adviser Goldman Sachs. It was the first talks between the two sides’ management.

When, at just after 5pm, Betfair said it had agreed to a 24-hour extension of CVC’s put-up-or-shut-up deadline, some might have wagered a deal was on the cards. They would have lost their money. Five hours later all bets were off.
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Why the talks broke down is now hotly disputed. CVC, which was working with 6pc investor Richard Koch and another shareholder Antony Ball, simply said it had “been unable to agree financial terms with the board of Betfair”.

But Betfair bridles at that, claiming the real reason is far more complex, as its statement to the Stock Exchange implied. It said that, during Monday’s discussions, “it became clear that it would not be possible to agree the terms of any proposal in conjunction with a business plan that was deliverable”.

CVC’s proposal, claim Betfair sources, was wholly reliant on poaching Corcoran and his team, as it had failed to line up any management of its own. Not only that. It wanted Corcoran to back a business plan that was so far removed from the one that the new Betfair boss had presented only a few days earlier as part of the group’s defence that he would have been unable to have done it with a straight face.

“CVC had a cloud cuckoo plan and no management,” claimed one insider.

The private equity firm, which typically tries to work with existing management, would disagree with that. But there were strategic differences.

The CVC plan was partly penned by Koch, a long-term advocate of keeping the exchange – built on peer-to-peer betting – the absolute centre of the business. Koch has been dubbed an “exchange evangelist”, like ex-Betfair managing director Mark Davies, who in a recent blog cautioned against the group becoming a conventional “me-too” gambling company.

Alongside that, the CVC plan called for a focus on cash margins and a cut in customer numbers, concentrating on the big fish not the minnows. That allowed the marketing budget to be slashed from a historic £90m-£100m a year to £20m as Betfair stopped chasing tiddlers only interested in £10 free bets.

By contrast Corcoran, who joined from Paddy Power last August, has put Betfair’s new sportsbook – offering similar fixed-odds wagers to other bookies – at the centre of his strategy.

He sees Betfair’s unique proposition as the interplay of the exchange and the sportsbook, highlighting how it helped drive an 18pc rise in customers in the past six months, with 24pc of football punters now betting on both.

“I’m paid to drive shareholder value not to pay homage to the exchange,” Corcoran declared tellingly last week.

He’s also earmarking an extra £10m of cost savings he’s found for marketing.

Even so, sources close to CVC claim the strategic differences are not as big as Betfair suggests. “All they are trying to do is deflect attention from the fact that they turned down 950p,” said one.

Indeed, even with the shares dropping just 30 to 865p yesterday, some big shareholders are livid. Half the shares are owned by investors from before 2010’s disastrous £13-a-share float. Many, thought to include Japan’s Softbank and co-founder Andrew Black, with around 7pc, were happy to back CVC at £9.50 or less because it planned to allow them to roll over their investment and benefit from any upside.

Protecting Corcoran from the bid fall-out is also a key motivation of the Betfair board. Last week he admitted that, thanks to the bid, “we are showing a bit more leg than we might have like to”.

Now he has 950p to shoot for, you hope he’s not already shown too much.

interesting.

the thing that keeps striking me about all this is that they make so much of the six month customer acquisition numbers, yet seemingly these are largely the product of buying a load of customers as a job lot just before the end of the financial year.

you could put those two things together and see a hint of desperation; in which case rejecting the 950 share price would have been a gambit to squeeze a bit more out of CVC which has badly backfired.

well, yes - if I was part of the bid, I'd want to know the details of how that 24% was calculated.

if it includes anyone who's ever had one bet on the sportsbook, it's pretty meaningless, as it will include people who've taken advantage of offers, people who've arbed the sportsbook against the exchange and even people who unwittingly used the sportsbook thinking it was the exchange.

I'm not an expert in any of this at all, but it's fascinating reading.  If, as it sounds, a key issue is the fact that CVC's business plan could not or would not be delivered by current management then I guess we can see why the current management is desperately trying to justify it's own existence and strategy.  Do the investors who bought in to a unique, innovative, technology-focussed gambling company and are now being given a second-rate bookie really agree?

The fact that CVC has a radically different business plan but allegedly no replacement management lined up seems interesting- but there seems to be a very obvious solution to this that must surely be Mark Davies, who has been commenting regularly on the process, and who, despite protestations to the contrary, would surely be amenable to return as CEO of a company he loves, under someone he respects, and going in a direction he favours. 

Indeed, his latest blog hints that the sticking point is the change of management, without of course discussing any potential part he might have in that.  If his analysis is correct then Corcoran has at least one major shareholder firmly on his side blocking the deal, but the guy had better deliver quickly to keep his position.  And any attempt to do so in the short-term is unlikely to be to the benefit of the business longer-term.

I MEANT THIS COMPANY NOT COUNTRY ^^^^^^

well, if the guy's that brilliant a marketer and exchange betting is such an inherently better product than traditional bookies, how hard would it really have been to get BF more than 12% of the market?

He doesn't want to market the exchange b/c of fears 1) that the home market is saturated, and 2) that expanding in grey and unlicensed territories is too risky.

It's harder to market an online only bookie b/c the bond that casual players have w/ premises is absent and b/c some of these punters are more price-sensitive than he realised.

We can all think of the most hard-hitting advert with, say, a bookie laughing jovially and spreading the craic until a punter wants to put his cash on a warm one / a Pricewise selection, then the bookie stops laughing and shuts up shop or the prison-type grille they have in bookies comes down and the customer is turned away. The reason that bf have not run any ad like this (instead having a penny-punting mug blinking in an empty pub) is that they want to be part of the industry they spent their first eight years or so taking on.

viv, The prob. is that there are some shareholders in bf i.e. the management whom the bid envisaged wd remain in place but who disagree w/ the pure exchange-model bf strategy.

Koch likes the company, can accept the current management (esp. if other major shareholders believe in them) but thinks with the sportbook the company is going down the wrong path. His shareholder value has withered too long for him. His bid seems to be a bit of a flier--i.e. he doesn't have his own team, his own projections etc. and doesn't anticipate doing anything other than bf were doing 2000-7.

But the idea that the exchange runs itself and only needs a very good PR dept. and legal counsel was roughly how bf kept afloat in its massive growth phase.

this Corcoran person may (or may not ... i know nothing of him) be a good salesman, but why on earth is a sales rep allowed on the management 'team' ?

managers manage, salesmen sell.

buy him a bike and some cycle clips and pay him to knock on doors. If sales increase give him some commission and invite him for a drink at the next board meeting.

Viv, presumably to those shareholders who cannot be bought out, viz. the management team who will be locked in to incentive programs for options / performance-related pay.

This can only be a transitory problem.

frog, Breon Corcoran wd not have wanted to run BF had he not believed in the exchange model. Perhaps he just believed in exchanges as a price-finding mechanism and wanted to take advantage of exchange players' activity in some other way i.e. through a sportsbook.

Bf under his management has had too many really wretched execution probs. i.e. Beta to convince me that he has a fully worked-out long-term strategy that everyone in the company understands and can line up behind.

His target is to get revenues and EPS to a set amount by April 2015. Thats two years. I think the revenue figure is set at £498.3m which is quite a jump from the current £385m.

When you look at it from that point of view you can see why the incentive is there for a short term dilution of the Betfair brand in order to boost revenue and EPS by driving the sportsbook forward. I think hills revenue increased by £100m last year this way.

The problem for long term shareholders is that the dilution of the Betfair brand and the further moving away from the exchange as priority means Betfair loses its USP.

It could be argued that it the distraction of other products (Lmax, poker, games, casino etc) is what has caused the problems in the first place. Instead of staying 100% focused on building a brilliant unique business they have thrown time and resources at copycat offshoots.

Extremely well put frog, the problem betfair are now going to find through their philosophy of growth at any cost, that the people at the top brought in to run the company are going to have short term goals and short term fixes to improve their c.v not Betfairs longevity as they know within 5 years they probably would have moved on.

Surely if they thought Mark Davies was the right man to be CEO they would have given him the job 2005 instead of David Yu? At the time he was the face of Betfair so you would have thought he would have been the perfect person to take the company to floatation in 2008.

As Chairman they have Gerald Corbett, who ran Railtrack at the time that the company failed when it had to find 750 mill. of damages and maintenance costs after the Hatfield disaster.

It's likely that his experience will make him terrified of any form of regulation. When Mr Corcoran says that he is going to take bf out of any jurisdictions where there is a question mark hanging over laying and replace the revenue through charges and new products, it's very possible that Corbett will be with him all the way.

It seems very unlikely that as Chair Corbett wd have endorsed any plan that envisaged international expansion. He will not have too much of an idea of the debates around liquidity and pc--rather having an idea that bookmakers win the more bets they take and that their key metrics are rather sales and margin.