View from the City: The specialisation trend is driving fragmentation
Dr Era Gavrielides, director at PwC’s London Betting and Gaming Centre of Excellence, reflects on M&A trends and the latest market movements
From consolidation to re-fragmentation?
The last few years have been particularly busy from an M&A perspective as operators have looked to acquisitions to bolster their brand, product, and territory portfolios and to capture economies of scale. This trend clearly continues, with the proposed merger between Bally’s and Gamesys a case in point. At the same time, we see a parallel specialisation trend driving fragmentation. Examples abound. Playtech is divesting its financial arm, Scientific Games is looking to divest its lottery and sports betting businesses, Golden Nugget Online Gaming is being sold by the land-based business to DraftKings, and Tabcorp is looking to de-merge and divest lottery and keno from betting and gaming. This creates opportunities for operators and investors to drive growth in the now more focused, divested units.
The battle for the more casual player is driving related M&A
Operator investments in the US since PASPA’s repeal have led to an increased focus on more casual players, given lower US player sophistication, and driven interest in esports and social gaming. While we expect to see more transactions such as Entain’s recent acquisition of Unikrn going forward, the interesting question is how such investments will be leveraged beyond the US and whether they can drive sustainable advantage.
The growing role of tech as a value-driver boosts interest in B2B transactions
Technology has always been a key success factor driving product and brand advantage, but its role has become increasingly multifaceted. Data and tech are now also central for meeting increasing social responsibility demands (i.e. by regulators) and navigating increasingly complex regulatory landscapes as the trend for country-by-country regulation of online betting and gaming continues. This incentivises operators to insource some areas of technology that are key to their ‘secret sauce’ and buy in additional tech capabilities that give them an edge. It also creates a strong interest for investors to invest in B2B winners early. Will investment in B2B lead to more vertical rather than horizontal integration and run counter to the specialisation trend? We think specialisation will win but watch this space.