The prize draws and competitions (PDC) sector has evolved rapidly over the last few years. What began as an entrepreneurial, founder-led market is now attracting sophisticated buyers, and with that comes a whole new level of scrutiny on how these businesses are actually built and run.
We’ve acted for sellers on deals in this sector, so we know first-hand what buyers focus on, where the risks tend to come from, and how you can best set yourself up for a clean exit.
You may have heard that the PDC sector is entering a new regulatory era. The UK Government-backed Voluntary Code of Good Practice for Prize Draw Operators (Voluntary Code) came into force in May 2026, with a strong focus on player protection, transparency and accountability (no great surprises there). While it’s technically voluntary, buyers are already treating it as the baseline standard, and the Government has made clear that tighter regulation may follow if standards don’t improve.
If you’re an operator of a prize competition business and you’re thinking about selling, the bottom line is that the earlier you start getting ready, the better.
What makes this sector different
Selling a prize competition business isn’t like selling most other small businesses. Things you probably thought of as day-to-day operational matters, such as how your free entry route works, your email consent wording and how you handle complaints can suddenly become sticking points in a deal. And now that the Voluntary Code is in play, buyers are increasingly focused not just on what you’ve done historically, but on whether your business is built to survive tighter regulation in the future.
That means corporate, regulatory, employment, consumer protection, advertising, data privacy, tax and intellectual property issues can all come into play at once.
The key areas buyers focus on
In our experience, most operators of prize competition businesses are surprised by just how much detail buyers go into in their due diligence investigations. We summarise below the areas that in our experience receive most scrutiny:
1. The Voluntary Code
As mentioned above, even though the Voluntary Code is voluntary and perceived as a lighter touch approach from the Government, buyers are treating it as a serious indicator of how well-run a business is. If your compliance has historically been “light touch”, expect questions. Buyers will want to know about self-exclusion tools, customer spend controls, credit card restrictions and complaints processes.
2. Free entry route compliance
This is one of the most heavily scrutinised areas in any prize competition deal. A buyer will want to know that your free entry route has genuinely been operated in a compliant and transparent manner. Buyers will review:
- website wording;
- terms and conditions;
- customer journey design;
- marketing materials; and
- operational evidence showing how free entries were processed.
If the free entry mechanism has been poorly implemented, that can affect your valuation and may result in the buyer insisting on greater contractual protections e.g. stronger warranties or an indemnity (entitling the buyer to pound for pound recovery for any losses it suffers) to cover any legal risk they’re taking on.
3. Advertising and marketing practices
Marketing is one of the riskiest areas in any prize competition deal. Buyers will typically look into:
- paid advertising campaigns;
- Advertising Standards Agency (ASA) compliance;
- promotional claims;
- winner announcements; and
- representations relating to odds or prizes.
If you can show that your marketing has been run properly, that will go a long way with any buyer.
4. Customer data and CRM value
Your customer database is the jewel in the crown. That means your GDPR compliance and data practices are likely to get a lot more attention than you might expect. Areas commonly reviewed include:
- privacy policies;
- consent records;
- email and SMS marketing permissions;
- use of tracking technologies; and
- third-party data sharing arrangements.
A well-organised customer database with clean, properly obtained consents is one of the things a buyer will scrutinise closely in its legal due diligence.
5. Payment providers and banking relationships
Your payment processing setup matters more than many PDC operators realise. Buyers will want to understand:
- merchant acquiring relationships;
- chargeback history;
- anti-fraud systems;
- KYC processes; and
- any historical account suspensions or investigations.
Any instability in your payment infrastructure e.g. account suspensions, high chargebacks and processor restrictions can become a deal issue and affect both valuation and deal structure.
6. VAT and historic tax risk
VAT treatment is receiving increased attention in transactions in the PDC sector. HMRC has clarified its position on whether entry fees constitute consideration for a taxable supply, and buyers are now specifically investigating:
- whether VAT has been correctly accounted for on entry fees;
- the risk of historic underpayment;
- the robustness of the business’s tax advice and filings; and
- whether any contingent VAT exposure should be reflected in the deal.
In short, if there’s a VAT problem, it’s likely to affect the scope of the tax warranties and indemnities the buyer requires, and may result in part of the purchase price being deferred or held in escrow. A buyer may also require the right to set off any future claim directly against that deferred amount before it’s released to you.
7. Intellectual property and brand protection
Strong branding has become a major differentiator in an increasingly crowded market. Buyers are now paying close attention to:
- trade mark protection;
- ownership of creative assets;
- software ownership;
- platform licensing arrangements; and
- social media account control.
One of the most common avoidable problems is where core assets e.g. the platform, creative content or social media accounts are held personally by founders, developers or marketing agencies rather than by the company itself. This should ideally be resolved before any sale process begins.
Warranties and disclosure – what sellers need to know
Buyers in the PDC sector tend to expect detailed warranties covering, among other more routine matters, compliance with the Gambling Act 2005, free entry route operation, advertising, ASA and CAP Code compliance, GDPR and customer consent, payment processing arrangements and IP ownership.
Alongside the warranties comes the disclosure process. This is where you have the opportunity to flag anything to the buyer that might not be entirely squeaky clean. Even well-run operators will typically have historic issues that need careful handling. Identifying these issues early, managing them through disclosure and ensuring operators are appropriately protected against future warranty claims are among the most important things a seller’s legal team can do.
We have significant experience advising prize competition operators through this process, we know where the issues tend to arise and how to handle them in a way that protects sellers and keeps transactions on track.
Preparing for exit
If sale is on your radar, even if it’s a couple of years away, the best time to start getting ready is now. Doing the groundwork in advance makes the whole process smoother, keeps you in a stronger negotiating position, and helps protect the value you’ve built. The smoothest sales involve businesses that already have:
- well-maintained corporate records, including up-to-date registers, filed accounts and a clear cap table;
- properly drafted, sector-compliant terms and conditions, including competition rules that will hold up to scrutiny;
- written contracts in place with employees, contractors, suppliers and any commercial partners;
- documented compliance procedures covering gambling law, consumer protection and data privacy obligations;
- a lawful basis for all marketing activity and properly obtained, documented customer consents; and
- clarity over intellectual property ownership, including branding, software and any licensed content.
How we can help
We’ve advised on deals in this sector and we know how they work. Whether you’ve had an approach from a potential buyer and need to move quickly, or you’re thinking about a sale further down the line and want to get properly prepared, we can help at every stage, from getting your house in order through to negotiating and closing a deal.
To discuss the content of this article, please contact Ben Gale, Corporate M&A partner.
This article is designed for general information purposes only and does not constitute legal advice. The issues and scenarios discussed are illustrative and do not reflect any specific transaction or matter we have advised on.
