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Betfair CFO, Stephen Morana

Betfair CFO Stephen Morana is playing his cards close to his chest over a possible flotation. Whatever happens, he knows he has a strong hand

Photography: Anton Hammerl

Despite news that the mooted flotations of fashion retailer New Look and
London Eye operator Merlin Entertainments have been shelved, rumours that online
gaming business Betfair will join the listed world in 2010 continue to gather

Analyst David Buik of BGC Partners summed up New Look and Merlin’s problem
with his comment in The Telegraph in February that sentiment, not
valuation, stood in the way ­ but he added that he believed a Betfair flotation
would be “the only one I can see getting away easily… lots of people have heard
of it and there will probably be strong interest from retail investors.” Of
course, the company is saying nothing and its chief financial officer, Stephen
Morana, isn’t about to break rank.

“The reality is, we are a very successful private company that people want to
write about. Being private means one of the options is an IPO, but I think we’ve
proven that there are many other options for strategic growth and to get
liquidity to shareholders as well,” Morana tells Financial Director.
“An IPO remains one of the options that are on the table.”

He refuses to outright deny, though, that a flotation is on the cards,
saying only that the business would “do the right thing for the shareholders”
and that “at the moment, we’re really focusing on trying to grow the business as
best we can” – naturally. Meanwhile, stories abound that Betfair has retained
the services of Goldman Sachs and Morgan Stanley to advise it on what is said to
be a £1.5bn flotation to happen this Autumn.

Up the ante
That move could give Betfair the financial flexibility to buy up other, small
players in its space and would give it the liquidity to fight its case in other,
lucrative but untapped markets where some of what it does, such as sports
betting, is either illegal or monopolised by local players. Morana has his
sights set on Japan and China (whether the fact that Japan’s Softbank is a big
shareholder in the business is a help or not is unclear).

Betting legislation abroad is a game changer for the business, as it was in
2005 when its first foray into the possibility of a flotation was canned due to
concerns about the health of the industry and the effects of legal challenges to
online sports betting from the US.

For Morana, it would be a golden opportunity to lead, though the world’s
largest online betting company remains something of an upstart, it into its next
natural phase of development, raising both his profile and the work he has done
in preparing it for the public stage. He joined the business in 2002 as head of
finance (though the title belied the fact that the business had no finance
function at that stage) and was made finance director in 2005 by the time a
finance team was in place. He became CFO in September 2006, overseeing 70 staff
in and out of the UK.

Morana has relished the learning curve of leading and building a growth
business from its early stages; his CEO, David Yu, joined shortly before he did
and was made CEO the same year Morana was made CFO. “When I joined we had a
purchase ledger clerk who came in two days a week and an accounts manager who
came in one day a month to reconcile and to pay payroll,” he says. Today, the
business relies heavily on its finance staff given its numbers: £250m of client
money on deposit through their betting accounts, £4bn in bets through their site
each year, $3.1bn in the bank ­ and no debt.

“It’s a hugely complex monster and it’s been the biggest challenge and
learning curve,” he says. “I’ve been fortunate enough to be in a position to
build that [finance] team.”

Safe bet
He might have been expected to go for the CEO role when it became vacant in 2006
and, to the outside world, having been one of the most senior people in the
business and not becoming CEO at that time looked as if Morana had been passed
over. The CFO bats this accusation down insisting that he believed Yu’s
technology background ­ he had been both chief operating officer and former
chief information officer at Betfair and is a fully paid up computer geek, with
the relevant scrolls from Stanford and California universities to boot ­ made
him the natural candidate, so much so that Morana did not even apply for the

“David is one of the most intelligent people I’ve ever come across and can do
whatever he needs to very well,” says Morana. “He is probably one of the most
sought-after CEOs in the country.” Well, that would be hard to back up with hard
evidence, but at least for Morana he has the pleasure of working alongside a CEO
he believes in.

And he thinks that the board’s selection has been vindicated many times over.
“David’s record since 2006 speaks for itself ­ he has doubled the size of our
business. He was definitely the right choice.” Would he want that job one day,
say, if the UK’s most sought-after CEO was tempted away? “That’s a difficult
one. It’s a case of semantics,” he says cryptically. “I hope to work for David
for the foreseeable future and if he was to leave, I think it would be difficult
for the company. And I don’t want to worry about all that for now.”

Indeed, Morana is unusually vocal about his belief in Yu and his job
supporting him, driving strategy, building a finance function that can support
the business and ensuring the company has the right business partners from a
finance perspective as well as understanding the needs of shareholders. “You’ve
got to be able to give your CEO very frank, honest advice and once he’s made a
decision you’ve got to be able to support him all the way,” he says.

And the admiration is sickeningly mutual: on Morana’s appointment as CFO, Yu
said he found it “particularly gratifying to have witnessed first hand the
excellent job Stephen has done for us” and lauded his “great motivational and
leadership qualities”. He also has strong working relationships with the two
co-founders that sit on the board, chairman Ed Wray and Andrew Black ­ so much
so that Black named a thoroughbred horse after him. (The horse, Morana, was a
winner at Ascot last year.)

Horses for courses
Morana’s experience would put him firmly in the frame for the top job. Having
joined Betfair from Sapient, the Nasdaq-listed tech and business consultancy for
which he was head of UK finance, he imported a mixture of gaming, internet and
technology experience from elsewhere. And he counts Betfair’s co-founders as
personal friends, something that would surely smooth the way.

Flotation or no, Morana sees himself sticking around at Betfair for some
time yet. “I have the best job in the country as a CFO. I don’t think there’s a
more exciting or challenging place to be,” he says, reiterating that he doesn’t
feel he’s at the stage where he has to make a decision about his next move. He
is quick to play down any notion that he’s too comfortable in his job after a
five-year stint.

“I’m definitely not in a comfort zone. Betfair wouldn’t allow people to be in
a comfort zone, but I can look at my career progression for the next couple of
years and think that, personally, I can achieve what I want from continuing to
drive the CFO role within Betfair.”

Sitting as the only other executive director alongside the CEO on Betfair’s
board, presenting at most investor meetings and driving the agenda of the audit
committee is a first for Morana. He is also non-executive director at
behavioural analysis oufit Featurespace and LMAX, Betfair’s spread betting
spin-off (which used to be known as Tradefair).

It may well be the perfect CFO job, but there are still big issues with which
Morana must contend. One such issue is the regulation of online gaming­
something he finds “incredibly frustrating” and that strikes at the heart of the
business model. He hopes that in Europe in a few years’ time a single license
for online gaming companies to trade in any country will emerge, allowing it to
be treated as any other product or service and taxed as such ­ tapping huge
demand for sports betting in Asia, for example.

“We want to work with governments, we want to pay taxes and we want to work
with sporting bodies,” Morana says. “We believe that protecting underage and
problem gamblers is absolutely key. We want to raise the bar, but if governments
won’t work together on that you end up competing at the lowest common
denominator and that’s not good for the industry as a whole.”

Morana hopes to still be in the business when the rules change. “At some
stage,” he says, “governments have to realise that prohibition in these
countries hasn’t worked and that regulation, licensing with an equitable tax
policy will be beneficial for the customer and the UK government.”

Whether it’s at Betfair or elsewhere, it seems likely he’ll continue to drive
the agenda in the online betting market somehow.

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