Moody’s: Covid-19 a catalyst for more consolidation in “polarised” international market
Investment ratings agency points to uncertain long-term future for mid-market operators
Global rating agency Moody’s has said it expects Covid-19 to be the catalyst for a new wave of international industry consolidation among online gambling operators.
Speaking to EGR Intel, Moody’s assistant vice-president and analyst Florent Egonneau cited two main factors in driving up instances of M&A activity among operators following the crisis.
“The first driver is operational and strategic driven by the need and/or willingness to diversify business profiles across distribution channels (i.e. online versus retail) but also products (i.e. sports betting versus gaming),” said Egonneau.
“The other driver would be a financial one with opportunities for larger operators with a stronger balance sheet to benefit from depressed valuations to expand and gain market shares,” Egonneau added.
Egonneau said while the market remains fragmented, it is also becoming “polarised” between multi-billion revenue operators such as bet365, Flutter and GVC, mid-market operators including Hills, Kindred and 888, and local/niche firms.
“In this context, mid-market companies could also look to merge in an effort to keep relevant scale,” Egonneau claimed.
In a recent European market update, Moody’s claimed that most gambling operators could cope with a two-month shutdown due to Covid-19, but said the recovery phase for most businesses was uncertain.
Moody’s expects land-based gambling facilities to remain closed for some time after international restrictions are lifted due to the non-essential nature of those activities and an “increasing government willingness” to maintain social distancing measures.
Over a short-term period, Egonneau cited the flexibility of operator cost structure and liquidity as affecting the ability to service debts caused due to the Covid-19 lockdown.
“In the long term, we expect gaming revenue to go back to historical levels as sporting events and retail operations resume, but revenue during the lockdown will be permanently lost, unlike other sectors where deferred sales will eventually take place,” Egonneau added.