Casinos for youWith constant reports on mergers and acquisitions in the iGaming industry, it can seem like a game of Monopoly. Why are smaller companies selling and is it a smart move for larger ones to dilute their brand?
The gambling market continues with merger and acquisition (M&A) transactions as the industry grows into its stupendous potential. M&A is a well-established topic in most markets and some believe consolidation is inevitable.
While discussing the industry’s acquisition activity, Lloyd Danzig from a specialist firm in the M&A space noted the major drivers behind these headline-worthy transactions are, “access to technology, access to customers, and access to markets/licences”.
If this is why the smaller, independent firms decide to join a larger controlling company, the industry giants do so to become even larger.
Match Making in the Gambling Market
Every other week brings news of mergers and acquisitions in the gambling space. Some include transactions between land-based and online operators, while others report on how iGaming companies increase their market share by acquiring smaller ventures.
Chris Grove, from Eilers & Krejcik Gaming, offered a bird's-eye view of the industry’s M&A and said:
“We expect the majority of every small- to mid-sized player in the space to merge or be acquired.”
An iGaming company well-versed in M&A is Evolution Gaming. Their most recent acquisition of the software studio Nolimit City positions the online live casino games provider at a significant advantage against its competitor.
The recent addition to their collection of software studios allows Evolution to offer a one-stop service to platform providers. Instead of acquiring every willing start-up, the Maltese company strategically opts for the best in certain categories.
Land-based casino companies weigh their options between building an internal iGaming department from scratch or saving time by acquiring an existing studio with the talent and infrastructure to fast-track business with an online platform. Gambling behemoth, MGM Resorts, recently followed the latter route and gained the Swedish iGaming company, LeoVegas.
What’s the Deal?
Media reports rarely cite strong-arming or hostile takeovers, and it seems like gambling M&A transactions run smoothly. This indicates transactions that benefit both parties. Big established operators seek unique content ready for the demanding online consumer market. Small to medium enterprises need more financial resources and a foothold in the gambling market.
Young, dynamic software providers with creative teams disrupt the gaming market with unique approaches. The likes of NetEnt, Red Tiger, and NoLimit City have essential segments they cater for, and Evolution secured these companies’ futures in iGaming through acquisitions.
We could argue that these brands already had a strong enough following to be successful with no M&A. However, the market has become increasingly cutthroat, where it seems like picking a team with longer industry roots has undeniable benefits.
Who Has the Most to Lose?
When the acquired company may continue with creative freedom and produce content at the level it did before the transaction, both businesses enjoy the success. However, when the deal stifles creativity and employee efficacy,f acquisition indigestion sets in and the future of the relationship becomes uncertain.
Both parties risk a lot, but essentially, the buyer takes on the greatest risk. Approximately 70% of all M&A transactions fail or cause dissatisfaction for the buyer. With gambling companies focused on taking over the iGaming industry, matched company cultures and ideology should accompany best practices and proper due diligence before leaders make the final call.
With more M&A transactions on the horizon, it is unclear what the future operator market will look like. Will there be a handful of giants offering content from their dozens of subsidiaries, or will one hold the throne?
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