Online casino consolidation

The casino gaming industry has recently seen a raft of merger and acquisitions deals and it looks very much as though we can expect this to be a trend that still has quite some way to run. In the US these deals can be seen to prominently feature tie-ups between large casino gaming operators, both land-based and online, and the casino technology companies. Other deals, mainly in Europe and Asia, show consolidation between online operators.

The online casino market has matured over the past two decades into a major industry but is still an extremely fractured market with several larger players and hundreds of smaller operators competing in a crowded marketplace. The consolidation trend has featured larger online casinos acquiring quickly growing competitors as well as mergers between groups of two or more smaller operators.

The third major type of consolidation has been between online casino brands and the technology companies which power their platforms and bet builder games. Until now there has been a relatively clear distinction between casino technology companies and casino operators, even in the online world. Although some of the larger operators have invested in developing their own custom casino platforms and games, the majority of the industry runs on white label platforms licensed from a handful of casino technology companies. Payments systems and the games themselves are also mainly provided by third party companies and online casinos can be roughly split into groups based on their loyalty to a particular technology provider. However, that may be set to change with casinos both increasingly developing their own proprietary titles in-house, either by setting up research and development teams, or by the acquisition of smaller technology companies.

Analysing the casino game industry, the stock picking website considers that this consolidation process in the casino industry is an important step unlocking hidden potential value and ‘expanding company offerings horizontally in the gaming space’.

The market seems to agree. After the announcement of their recent merger, the share prices for Bally Technologies (BYI), Scientific Games (SGMS), and Pinnacle Entertainment (PNK) surged.

Deals can generally be characterised as companies looking to expand into different markets, either geographically, as in the case of Bwin purchasing Gioco Digitale, one of Italy’s biggest online poker sites, a move into the digital world by traditional casinos and virtual casino leaders like betsafe casino acquiring niche competitors.