Merger and acquisition (M&A) strategies are in vogue for quite some time. Merger and acquisition activity is fueled by many reasons, but the most powerful motivation for it is to maximize the companies’ profitability. Consolidation activity is mostly the preferred business tactic for companies that look to crack on new markets, gain a competitive edge or expand their portfolio with new skills or products.
In highly competitive markets, M&A deals have become a must for the companies to stay ahead of the competition. Such deals are best described with the cliché phrase “win-win” for both parties. Merger and acquisition deals can be simply explained as follows: one company buys another fellow company for a substantial amount of due diligence paid by the buyer. Usually, the company buyer assumes control over the target company’s assets, intellectual property or any other property, designated in the deal. Value of mergers and acquisitions totaled trillions this year.
Increased Merger Activity within the Global Gambling Industry
When it comes to the global gambling industry, merger and acquisition activity has turned into a one-hit wonder for the companies. Some of the biggest industry-involved companies have joined forces with other business units in a bid to beat the competition and weather any regulatory storms.
The rest of the companies are still on their shopping spree, looking for their perfect partner to join forces with and create a strategic alliance. It should be admitted that 2017 was an interesting year, full of transitions and M&A deals. Some deals were more noteworthy than others, but industry-involved companies all around the world embraced the trend and are working to make the most of it.
The combination of ever-changing regulatory regimes and the over-saturated market has led to a flurry of M&A activity in the gambling industry. Last year, many companies have started to look for a partner to join forces with and enhance their performance on the market. Some deals failed, others were closed even by the end of the same year, but a number of companies extended their merger deadline for 2017. On the threshold of the new 2018, the team from Casino Reports decided to take stock of the year and forecast what the future may have in store for the gambling industry.
Largest Acquisition Deals Completed in 2017
In November this year, online casino operator LeoVegas announced that it has completed its acquisition of UK-facing Royal Panda for a maximum price €120 million (€60 million initial payment and €60 more a possible earn-out payment). By acquiring Royal Panda, Leo Vegas has extended its presence on the thriving casino market, which seems to be among the best bets at present.
Leading provider of products and services for the gambling industry Scientific Games has acquired approximately 10.72% of outstanding ordinary shares in Canada-listed developer and supplier of a casino and betting content NYX Gaming Group. The company purchased issued and outstanding ordinary shares at a price of C$2.40 per share. Scientific Games’ move comes amid Canada’s attempt to deploy its gambling industry’s full potential. According to the latest news, the majority of the shareholders in NYX approved the company’s acquisition by Sci Games. The deal is yet to be finalized in January. The company buyer is to pay C$2.40 per share in order to fully assume control over NYX.
Another completed acquisition deal that changed the gambling landscape dramatically is the acquisition of fantasy sports company Draft by Paddy Power Betfair. The deal was worth the eye-popping $48 million and it is to expand Paddy Power Betfair’s presence on the U.S. market.
This summer brought us the news that online gambling group Kindred Group Plc completed £175 million acquisition of 32Red Plc. Kindred’s intention to buy 32Red was firstly announced in February. Only a few months later, the two companies joined forces to expand Kindred’s Unibet portfolio. The list of completed merger deals is long, but the aforementioned acquisitions are the most noteworthy of the year.
In the beginning of December, British bookmaker Ladbrokes Coral and international sports betting and gaming group GVC Holdings confirmed that consolidation talks are taking place. A few days before the end of the year, the two companies shook hands and GVC Holdings agreed to buy Ladbrokes Coral for $5.4 billion. This surprised the entire gambling community, as many industry experts believed that the two companies are to leave the deal for the next year.
Prognosis for Potential Mergers in 2018
It is yet too early to give an accurate estimation about the upcoming merger deals. Our prognosis is based on the companies, which have revealed that they have been in merger talks. It is important to note that the merger talks are not a sure sign that the two companies will take any further actions. The following lines present information about the companies, which are likely to pen a consolidation deal.
William Hill and The Stars Group May Lock Merger Deal
In October this year, it surfaced that gambling operator William Hill is planning to seal a merger deal with the Canadian gambling giant The Stars Group (recently re-branded from Amaya Inc.). The two companies announced their interests in consolidating their business operations. It is interesting to note that William Hill’s announcement came shortly after the UK government promised a clampdown on the highly condemned fixed-odds betting terminals (FOBTs).
In August this year, The Stars Group announced its appetite to bolster its presence on the market and move on from its David Baazov past. The Canadian company announced its interest in acquiring casino and sportsbook brands. This was an important year for The Stars Group, as the company managed to climb out the financial hole and significantly reduce its debt.
In 2016, the two companies discussed a £5-billion merger that would create another giant within the global gambling industry. The deal failed due to vocal opposition from William Hill’s leading investor Parvus Asset Management.
Paddy Power Betfair May Merge with CrownBet
Dublin-based gambling operator Paddy Power Betfair revealed its plans to expand its presence on the Australian gambling market. The company announced that it is discussing a potential merger deal with the Australian online sports betting operator CrownBet. Paddy Power Betfair, in fact, have a good exposure across Australia through its sports bet business. Rumours are swirling around that the company pursues consolidation deals in an attempt to address any possible regulatory challenges.
In the meanwhile, gambling operator William Hill also entered “very preliminary discussions” with CrownBet about a possible merger deal. It is interesting to note that 62% of CrownBet is owned by Crown Resorts (a company backed by billionaire James Packer). A wave of consolidation activity on the Australian market is expected since the last year, when Australia’s horse racing betting giant Tabcorp Holdings agreed to pay around A$6.4 billion to acquire lottery owner Tatts Group. The two companies created a multi-billion gambling behemoth.
Penn National Gaming May Join Forces with Pinnacle Entertainment
Penn National Gaming Inc is eyeing further expansion of its operations through the acquisition of rival casino owner Pinnacle Entertainment. The two companies are currently discussing a cash-and-stock deal. At present, Pinnacle owns gambling venues in Colorado, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, Ohio and Pennsylvania. The two companies are to set out the terms of the deal. Over the years, Penn National relied on acquisition deals to expand that fast on the market. It seems that its hunger for acquisition deals is still not satisfied. At present, Penn National owns 29 gaming facilities throughout 17 U.S. states and Canada. On 17th December, the two companies announced that they entered a cash-and-stock deal. The deal is to be closed some time next year.
At first glance, M&A deals may seem to be a far-fetched term with no realistic implementation. However, it is a matter of fact that mergers and acquisitions craze is sweeping the global gambling industry, changing its landscape drastically. As competition intensifies, companies are trying to keep their heads above the water and enhance their business operations as much as possible.
Consolidating their businesses through M&A deals seems to be the easiest fix for their problems. Apart from cutting costs and expanding their product lines, companies a raft of M&A deals is also spurred due to the constantly changing regulatory regimes of the countries around the globe. A look ahead at 2018 suggests that the M&A current mania is to accompany the coming year and remain the leading trend within the global gambling industry.