FANTINI ’ S FINANCE
Opportunity on the Horizon
Consolidation through mergers and acquisitions , market expansion and online gaming can provide new investment opportunities
BY FRANK FANTINI
Third-quarter earnings season is upon us , meaning we have half of all of 2024 financial performance to report when you add in the fourth-quarter reports also to come , yet it isn ’ t too early to peek into what 2025 and beyond might offer .
Let ’ s make a deal There are likely to be fewer gaming companies in the coming year , and , related to that , fewer publicly listed companies .
The consolidation has already begun among digital gaming companies , but should extend to suppliers of physical slot machines and brickand-mortar casinos .
There are a number of reasons to expect mergers and acquisitions to pick up . Two related reasons are likely declining and / or stable interest rates , which incentivize buyers , and the sheer amount of time since the last consolidation cycle , which has created pent-up demand among prospective sellers .
Some casino companies are likely to sell off non-core properties as MGM Resorts has done in the past and as little Full House Resorts is doing with its casino in smalltown Fallon , Nevada , and could do at Rising Sun , Indiana , if the plan to relocate its casino license there to Fort Wayne doesn ’ t pan out . Or , an Inspired Entertainment could sell its low-margin holiday parks in the United Kingdom to focus on its high-margin growth opportunities in digital and virtual games .
Companies with undervalued assets and no significant growth opportunities could put themselves up for sale , or look for an asset restructuring , such as selling real estate . Consider Golden Entertainment such a candidate , though it could also be a buyer of properties if prices are right . And do Bally ’ s Corp . or Century Casinos have futures as independent companies if growing profitability is the standard ?
Among supplier companies , a number of up- starts have made names for themselves with clever games , and could find the road to profits is quicker in selling to bigger competitors than trying to compete against them . Likewise , some of those big companies could find acquisitions a quicker and surer route than trying to grow in-house .
Already , a number of small companies have joined alliances with larger companies that suggest their next steps might be selling to them .
As mentioned , the digital world is consolidating , as it should . Among the companies already publicly announcing strategic alternatives is games provider Bragg Gaming .
In addition to gaming companies acquiring gaming companies , private equity firms can continue to move into the space as they have the luxury of paying higher prices for acquisitions knowing they are free of impatient investors and can wait for their paydays .
In this omnichannel world , the biggest winners will be those companies that use advanced technology to allow people to gamble anytime from nearly anywhere and place whatever kinds of wagers regulators will allow .
Demographics are the future For decades , gaming has grown through jurisdictional expansions and property expansions within new jurisdictions . Now , at least in the U . S . and Europe , much of that has played out . In addition , populations throughout the developed world are stagnant and , in most cases , have declined , or are about to .
Building another casino in rural Pennsylvania or refreshing a slot floor on a Louisiana riverboat aren ’ t going to move the needles .
Growth opportunities in the brick-and-mortar world are increasingly pegged on far-off places like Thailand , Middle Eastern emirates and Brazil . Such international growth could present selective opportunities , and Brazil is tempting given its 200 million-plus population . But one thing must always be kept in mind — business climates in much of the world depend on political climates , and few are as stable and reliable as those in already-developed markets .
For the next year or so , opportunities might be mostly limited to what urban planners call infill — that rural Pennsylvania casino , converting a New Hampshire charitable gambling hall into a casino , opening taverns in Las Vegas , perhaps replacing gray skill machines that have proliferated in recent years with conventional slots .
Let it grow , let it grow , let it grow While brick-and-mortar gaming is maturing , overall gambling continues to grow nicely as online spreads , especially in the U . S .
You might call this the rise of the omnies , to coin a word .
In this omnichannel world , the biggest winners will be those companies that use advanced technology to allow people to gamble anytime from nearly anywhere and place whatever kinds of wagers regulators will allow .
This also implies a convergence of business models , as the company that provides a hotel room and live table-game dealers might be the same that offers online wagering , digital dealers , and as suppliers pushing their games through every delivery channel . That future is effectively here , as supplier companies already are multichannel and many real-life casinos also offer games online .
As can be expected in such a dynamic era , there already have been winners and losers , and a lot of expensive learning has taken place .
But in a world of 5 billion adults , being able to provide a game to anyone at any time in any place makes for a lot of business opportunity . And that makes for a lot of investment opportunity .
Frank Fantini is principal at Fantini Advisors , investors and consultants with a focus on gaming .
12 Global Gaming Business NOVEMBER 2024