Outlook: Ladbrokes makes right decision for the second time

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The Independent Online

It has now been 18 months since Richard Glynn took the top job at Ladbrokes with a brief to drag the bookmaker into the 21st century, particularly by stepping up its online operations. One might take the view that he needs to sharpen his sense of urgency. After all, yesterday'sdecision to walk away from theacquisition of Sportingbet represents Mr Glynn's second failure in the space of six months to seal the deal on a major online expansion. Earlier this year, Ladbrokes also ended discussions with 888.

Still, one should note that the two deals foundered for quite different reasons. With Sportingbet, Mr Glynn has been unable to satisfy himself that an acquisition would not saddle Ladbrokes with unpleasant legacy regulatory issues. With 888, the issue was that Ladbrokes was simply not prepared to pay the price it was being asked for.

Would Mr Glynn's critics question either decision? Only if they felt comfortable with a much more gung-ho approach to doing business by the bookmaker. On Sportingbet, Ladbrokes has always made it clear it would not proceed unless it could get total reassurance about theregulatory position – and given the mess British bookmakers have found themselves in with online operations overseas in recent years, that seems eminently sensible. Similarly, overpaying for 888 would have been an utterly counter-productive move, damaging to shareholder value.

The problem for Ladbrokes is that these deals are not going to get any easier to pull off. In one sense, Mr Glynn's readiness to say no to 888's demands was a commendablestatement to the markets that he would not be pressured into doing a deal despite Ladbrokes' obvious need for one. On the other hand, the more time that goes by without the sort of step-change an acquisition would bring, the greater the pressure to do any deal at all will be.

Every potential target forLadbrokes knows the pressure the bookmaker is under to make an acquisition and will price themselves accordingly.

Ladbrokes hopes organic growth will ease that dilemma. It is in the process of investing heavily in its online offer – some of which is already beginning to bear fruit – and has found other ways to enhancerevenues, such as better in-shop gaming machines. It may be thatother M&A opportunities present themselves in the months and years ahead but, if not, at least there is a fallback position.

Is this the right strategy? Well, progress under Mr Glynn may not have been as swift as shareholders would have liked, but running a bookmaker is no different to managing any other business: calculated risks are fine, reckless gambles are not.