Where to invest? How Location Analysis can guide Event Driven strategies

Investors are increasingly looking towards new, non-traditional data sources to provide a deeper level of understanding, and guide their positions in ever changing markets. Talk of Big Data, Open Source Tech and Innovative Analytics Packages is prevalent and unsurprisingly, research teams are now turning to location analysis or ‘Location Insights’ (an understanding of where things are and the implications).

When thinking about location the same questions reoccur:

  1. Where can I find data with a geographical element?
  2. How do I analyse and manipulate this data?
  3. And what edge will it give me?

Let’s take a classic investment opportunity, a merger, to expand on question 3. In this scenario an astute event driven investor will take a position based on the likelihood of an acquisition occurring. Importantly geography can be a key driver, particularly in certain markets such as retail.

Last year two of the largest UK bookmakers, Ladbrokes and Gala Coral, announced their intention to merge. Such a move requires approval from regulatory bodies such as the CMA (Competitive Markets Authority) to ensure that competitiveness will not be unacceptably diminished. If this is not attained such a deal could be blocked. Interestingly the CMA’s stance was predominantly determined by one thing, geography.

“Licensed Betting Offices compete more strongly the closer they are to each other geographically and that, as such, distance is generally a good proxy for the strength of competitive constraints”
CMA, Summary of Final Report

Their analysis of the proximity of existing Ladbrokes and Gala Coral stores ultimately dictated their recommendation and the prospects of the merger. Understanding location really can pay, looking through the CMA’s report it’s clear their work could have been anticipated and replicated enabling a savvy investor to take a profitable positon in advance of any recommendations. 

To illustrate this the allmapdata team at Mapmechanics took a dataset and extracted a subset of all the Ladbrokes and Gala Coral stores in the UK. Location analysis was then carried out to highlight any stores within 400 and 800 metres of a rival (the distance within which the CMA state that competition occurs, following a merger competition would decrease in these areas).

The results can be seen in the map below and a quick analysis of these findings highlights that competition may be affected in certain locations. The CMAs recommendation that between 350-400 stores must be sold to clear the merger, is consequently unsurprising.

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About allmapdata from Mapmechanics

  • The allmapdata team from Mapmechanics assembles, configures, formats and distributes a wide range of data products for use within Equity Research aswell as a number of other areas; location intelligence, retail, business intelligence, IoT (M2M), smart cities, logistics and insurance telematics. The company’s extensive worldwide portfolio includes a massive number of high quality spatial datasets to match these use cases.
  • In addition, the allmapdata team provide comprehensive spatial consultancy services. If you need to get a project off the ground quickly and don’t have the time to learn map-based analysis, then our consultancy services could be the right solution for you.