Playing a clean game pays off for Dermot Smurfit jnr
The young pretender to the Smurfit crown on gambling, gaming and the ability to assess and manage risks rather than just take them
Dermot Smurfit Jnr: “I think Michael has respect for me. . . I would be super disappointed if he didn’t say: ‘Dermot is a good operator’ ”
In 2002, Jefferson Smurfit group was taken private in what at the time was one of the biggest ever European private equity deals. It resulted in a huge payday for the Smurfit family, with patriarch Michael Smurfit alone pocketing about €200 million. Not long afterwards at a family meeting Game Account Network (GAN) was born.
“It sounds very formal but it wasn’t. It was over dinner. The question was posed by one of the hierarchy: ‘Lads, you are the next generation: what are we going to invest in now?’ ” says Dermot Smurfit jnr.
“I said internet gaming. As long as we keep our noses clean, don’t prejudice our family reputation or our business interests worldwide – let’s get involved,” he recalls of the family discussion 12 years ago.
The idea was not as leftfield as it might seem. The son of Dermot Smurfit – brother of Michael – Dermot Jnr had eschewed the opportunity to join the family firm. He qualified as a lawyer in the UK before going to work for a merchant bank in New York, where he caught the tail end of the dot.com bubble. Amid all the chaos he saw the popularity of online poker and the potential to bring other skill-based gambling games online.
Gambling was not unfamiliar territory for the Smurfits. His uncle Alan had combined running Smurfit’s South American operations with being a professional card player. He was banned from several casinos and played under an assumed name. Horse racing was the vice of choice of most of the other Smurfits.
“Casino was a very big part of the environment in which I grew up. There were stories of legendary games of Chemin de fer . . . of Alan Smurfit using a pseudonym,” he says.
GAN’s initial focus was on consumers, but it quickly refocused on developing games that could then be licensed to third parties for their websites. Their first customer was UK Betting plc (now SkyBet). Well known brands such as Paddy Power, Sportingbet and William Hill followed, and in 2009 they landed a deal with Lottomatica, the Italian lottery giant.
The Smurfit name opened doors and the company had the backing of both Dermot Desmond and Andrew Black, the founder of Betfair. Desmond’s Betdaq was at that stage competing ferociously with Blacks online betting exchange for market share.
Dermot Smurfit had joined the company at the outset but became chief executive officer only four years ago. By 2010 the company was turning over £18 million but not yet profitable.
The original decision, in 2002, to “keep its nose clean” meant it was something of an also-ran in the exploding online gambling industry, which was unregulated and based offshore to get around national regulatory barriers.
“I had executives openly mocking me, saying, Dermot you’ve got to be in the US, you’ve got to be over here, you’ve got be over there.” His response was that the money was filthy and he was not interested.
The decision has started to pay off now as the US slowly opens up to online gambling and former activities of potential suppliers such as GAN are subjected to close scrutiny by regulators. “They are going to spend months coming to investigate you, your family – people you went to school with,” he says.
Real-money gamingGAN’s reward came in October 2013 when it partnered with Betfair to provide Trump Plaza Hotel and Casino with the technology to offer regulated real-money online gaming from November 2013. Andrew Black is a 9.8 per cent shareholder in GAN.
The potential of the US market – expected to be worth $8 billion by 2018 – convinced the Smurfits and the other investors in GAN to turn down a takeover offer and float the company on the AIM market in London and the ESM in Dublin. It was valued at £75 million.
“We took a gamble. We doubled down on our bet as shareholders in the business. We said look, 18 months ago we had an offer from a major land-based manufacturer of casino slot machines for £30 million; step forward 12 months we have got an offer for £52 million – so clearly somebody thinks we are on an up,” he says.