The pace of mergers and acquisitions in the sports betting and online gaming world has certainly picked up pace in recent months, largely with Penn’s purchase of National Gaming Score Media and Gaming as part of a $ 2 billion deal DraftKings went in to buy Golden Nugget Online Casino for $ 1.5 billion in stock.
These are both eye-opening numbers, and there is no analyst who believes M&A activity will end with these two deals.
In fact, according to a tweet from Ryan Butler of The Action Network, former William Hill CEO Joe Asher, whose company was bought by Caesars for $ 3.7 billion, said it is “inevitable” that the market will still evolve will continue to consolidate.
“The main drivers of M&A activity in the US sports betting industry continue to be access to technology, access to customers and access to markets / licenses,” said Lloyd Danzig, founder and managing partner of Sharp Alpha Advisor, a company-focused company Sports betting startups, technology and M&A. “The recent acquisitions of GNOG and theScore offer several combinations of these benefits. Given the speed of market development and the opportunity cost of time and resources, key stakeholders are more likely to buy than to build. “
Another reason? Simply the fact that the big ones tend to get bigger.
“We expect the majority of all small to medium-sized players in this space to be merged or acquired, ”said Chris Grove, who oversees the sports betting division of Eilers & Krejcik Gaming. “This is the trend in the US gambling industry and the macro trend in the international online gambling industry.”
Grove clearly expresses its views on the near future in terms of the pace of mergers and acquisitions.
“There is no doubt that M&A will be the defining trend in the US online betting industry for the next few years,” he said.
Danzig expanded the thought.
“The current product landscape is characterized by a high availability of substitute materials Products and negative switching costs, ”he said. “M&A is the most efficient mechanism that industry players can use to achieve vertical integration and product differentiation. This is just the beginning of a period of robust acquisition activity in the sports betting, online casino and broader competitive entertainment industries. “
And when it comes to Gdansk, the best thing to do is to assume that every company is up for grabs.
“The US sports betting and iGaming industry is on its way to becoming the largest in the world,” he said. “Every company with users, technology or market access is currently a potential acquisition target.”
The sports betting fusion craze will change the gaming market just as the mob once did https://t.co/0YHx3WPHaJ
– Bloomberg Opinion (@bopinion) August 14, 2021
And who’s next? Although no one has a crystal ball, Grove is ready to discard a few ideas.
“It’s important not to overlook the “m” in M&A, ”he said. “While there are a number of companies that are often cited as high value acquisition targets (e.g. Rush Street Interactive), there is also the potential for smaller companies to merge. Mergers and acquisitions can be of different sizes and across a variety of configurations. “
When Grove pushed for an example for two smaller companies to join forces, he offered PointsBet and Rush to join forces. (You heard it here first in case it happens.)
However, Gdansk thinks it is more likely that the sharks will continue to devour the guppies.
“Most operators do not have full control over their tech stacks and offer standardized users Experiences that don’t capture key user preferences, ”he said. “With liquid balance sheets and share trading as premium multipliers, the market leaders will become aggressive takeover of smaller companies that meet strategic needs. “
Big bigger Biggest
There is obviously a lot of buzz with larger companies taking over smaller ones and smaller companies merging. But what if two giants come together? Is that only in the cards from a distance?
“I would be surprised if you saw a consolidation among the top five operators at this point,” said Grove. “But it’s not unthinkable that we could see some cross-border M&A on a similar scale, such as MGM buying Entain.”
Gdansk is a little more optimistic when it comes to bigger moves.
“There is a significant supply of multi-billion dollar acquisitions and SPAC deals for the immediate horizon, ”he said. “Sports betting and iGaming spending in North America as a percentage of personal consumption is still well behind the developed gaming markets. Especially since the operators are expanding their focus on profit centers outside the betting area, M&A is an effective tool to target a TAM that goes far beyond the aggregated gross gaming revenue. “
So what will we see in the end when the dust settles? And for that answer, Grove and Danzig couldn’t be further apart. When asked if there will be a Big 2 or a Big 3 of operators, Grove got big.
“We’ll probably end up closer to Big 10 than Big 2, ”he said. “The US is a large, diverse, and highly fragmented market.”
However, Gdansk provides for mass consolidation.
“The mature market will likely resemble the credit card industry, with only a handful from large operators, significant regulatory overhead, product offerings that incorporate the same core functionality, and a strong focus on loyalty programs, ”he said. “Customer acquisition is driven by brand trust, platform accessibility and sign-up bonuses. Loyalty is driven by reliability, ongoing benefits, and customer service. “
The only surefire thing for the emerging US market seems to be uncertainty about where it is headed. Buckle up.
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