Future of M&A in gaming - all to play for

07 October 2020

by David Trunkfield Hospitality and Leisure Leader, PwC United Kingdom

Email +44 (0)7764 235446

M&A remains highly relevant to those in the gaming industry, as William Hill’s announcement on approaches from US prospective bidders shows. Predicting when the next deal will land may feel more like luck than judgement, but as we covered in our webinar with vixiogamblingcompliance, there are opportunities out there. Here’s a summary of where others may be looking to make their move.

Home field advantage in the land of hope and opportunity

Seizing the US opportunity was one of the drivers for M&A in the sector that we discussed as a panel. I’ve been reflecting on a comment made by Christine Zhou, equity analyst at Royal Bank of Canada (RBC) and one of my fellow panellists. It’s hard to value the US as an opportunity for analysts and investors. So well established US operators may be the ones who are best placed to assess the value of the market opportunity, and best able to unlock it by acquiring the requisite skills and capabilities to be successful in the online gambling sphere.

Control your technology, control your destiny

Which, in a roundabout way, also brings us to technology. This can also be an important driver of M&A as people look to control their own destiny, a point made by my other panellist, GVC Group Director of Corporate Strategy and Development, Nick Batram. We also discussed other drivers such as the desire for diversification, particularly post-COVID-19 where the value of having a diversified product and geographic portfolio has never been more apparent. There is also the increasing burden of regulation on operators, which has been an underlying driver of consolidation in the sector since the UK point of consumption (POC) tax introduction back in 2014. Finally, synergy realisation was the last major driver we touched on, with regulation and technology often significant areas of cost saving potential.

Globalisation to carry on in the gambling world

The panel expected to see several types of M&A. For example, market access type deals in jurisdictions like Latin America, where the established European operators would value local insight and knowledge. Regulation may also lead them down this route if licenses are linked to retail operations. Elsewhere, in-fill acquisitions in regulated markets like Eastern and Western Europe could be likely. There are often a number of local players with scale in their home markets, but who don’t have the scale of the large international operators. Finally US/Europe deals like the rumoured Caesars/Hills tie-up - though we aren’t expecting it so soon!

It will be fascinating to see now whether any of the large global land based casino operators follow the same path to up their exposure to the online segment. COVID-19 has brought home how this can be much more resilient to certain types of shock than the traditional retail environment, as well as benefiting from longer term structural tailwinds.

New opportunities across the ecosystem

We also discussed the prospect of more M&A in other parts of the gambling ecosystem, be that game developers, affiliates or data providers. We saw all of these as having prospects of more M&A on the horizon, for many of the same reasons as in the operator sphere. But also because if your customer base is becoming more concentrated then scaling up is a way to combat that and keep the balance of power stable with your customers.

For more on the outlook for global M&A industry trends, visit our website or contact me.

by David Trunkfield Hospitality and Leisure Leader, PwC United Kingdom

Email +44 (0)7764 235446