May 14, 2021 Sports Betting

From the Top: Diversifying M&A

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Tim Poole looks at how gaming mergers are changing in the US, as companies like DraftKings and Bally’s aim to offer an ever-broadening scope of products.

There was a time when operators would buy their fellow operators, suppliers would acquire their fellow suppliers, and that would be that. Today, companies still do that en masse; why wouldn’t they when the market is ripe for M&A? But it’s fair to assess that gaming mergers are changing. Including DraftKings and Bally’s Corporation, recent examples have seen gaming operators branch out by buying suppliers, affiliates and marketing firms. Companies now are looking to offer the whole package – and we’re seeing a diversification of our industry’s M&A.

 

DraftKings’ differentiation

A pioneering gaming firm in this sense, DraftKings has led the way of late in this sector – and that’s nothing to do with leading revenue positions across legal sports betting markets. Even when it went public in April 2020, DraftKings was one of the first high-profile gaming firms to merge with a SPAC (Special Purpose Acquisition Corporation), making this type of deal far more mainstream within our industry, even if SPACs have been around for years beforehand. It also purchased supplier SBTech at the same time, to ensure it was able to own and deliver its own technology stack, rather than rely on a third-party supplier as it previously did with Kambi.

More recently, DraftKings has added two new companies to its armoury, both very different from an operator swallowing up a direct competitor. First, DraftKings acquired VSiN (Vegas Sports Information Network), a multi-platform B2C broadcast and content firm, which delivers sports betting news, analysis and data to sports bettors. “VSiN creates authentic and credible content that resonates with sports bettors at every level, whether they’re experienced or new to sports wagering,” Jason Robins, DraftKings’ CEO and chairman, explained in the official press release. “In addition to its brand equity among sports bettors and engaging talent roster, VSiN also has an established infrastructure that DraftKings can immediately help expand, in the hopes of adding value to consumers who are looking to become more knowledgeable about sports betting.”

The benefits of adding a content brand like VSiN make complete sense with hindsight. And yet it needed an innovative approach in the first place: how best could DraftKings expand on its position? A feature of the organization’s deals to date has been purchasing new divisions that broaden the overall company’s scope in a horizontal sense. Buying up another operator to simply add a little market share here and there might cost more up front and not actually generate that much in return. So DraftKings followed up the VSiN acquisition with its purchase of Blue Ribbon Software, an Israel-based jackpot and gamification company.

“Integrating BlueRibbon’s proprietary, proven technology will enable DraftKings to create dynamic incentives for our users as they engage with our products,” said Paul Liberman, DraftKings president, global technology and product.

"The team at BlueRibbon brings technical and gamification expertise and broad industry experience to DraftKings; we are excited to leverage this technology to further differentiate our product offerings and engage customers in new ways.” Clearly, finding ways to differentiate is a key strategy for DraftKings. But this is more of an industry-wide trend: diversify or risk getting left behind.

 

Bally’s buyouts

In a similar position is the Bally’s brand, which has undergone a series of changes since completing its rebrand from Twin River Worldwide Holdings in November. The operator’s biggest deal of note is perhaps something you would describe as more traditional – a proposed merger with sizeable European brand Gamesys. Here, an amalgamation of regulation-ready European software and US branding power is exactly the kind of M&A Caesars Entertainment has already got in the works with William Hill.

But it’s Bally’s lesser-discussed M&A deals of late that may help it gain a greater defining edge in the market. In January, Bally’s acquired the beautifully named Monkey Knife Fight, North America’s third-largest daily fantasy sports (DFS) operator. "With this acquisition, we are pleased to enter into the high-growth DFS market. Monkey Knife Fight is a unique asset we look forward to incorporating into Bally's constantly growing omni-channel portfolio of land-based casinos and igaming platforms," George Papanier, Bally’s president and  CEO, remarked when the deal was announced.

In addition to Monkey Knife Fight, Bally’s further acquired SportCaller, a B2B free-to-play (F2P) provider, and has an acquisition pending of igaming supplier BetWorks. This also includes a failed attempt to purchase Allied Esports Entertainment, an esports firm that eventually went with Element Partners as an alternative buyer. So to recap, Bally’s is no longer just casino or sports betting. To compete in today’s market, it deems it necessary to additionally possess a software supplier, DFS operator, F2P brand and esports firm within its toolkit.

 

They are not alone

The key point here, though, is that neither Bally’s nor DraftKings will be alone in following this direction. Broadening horizons is already a key feature of gaming M&A and will continue long into the future. This is especially true in the US where there is such a heavy intersection between media, marketing and sports betting. When assessing operations geographically or by vertical, it’s equally likely most niches have already seen early market leaders develop strongholds in their respective markets. Instead of competing from scratch, it’s therefore logical for leading US and European firms to merge – á la Bally’s and Gamesys, Caesars and William Hill – or for a major player in sports betting to acquire a leading igaming, DFS, F2P or esports brand.

The future of US gaming firms is definitely a more rounded one, so it’s natural to expect a more varied selection of M&A. Yes, we may still see land-based behemoths merge with one another, where the market share involved will still be high enough to send reverberations across the sector. But even land-based casino firms will recognize that any shrewd M&A deals they conduct with smaller digital firms may have far more relevance in the longer-term future. Both DraftKings and Bally’s are following similar models but this will not be indicative of them alone; it’s what should follow for the rest of the gaming industry. The online gaming ecosystem of today sees both companies and verticals at opposite ends of the scale intertwine. The gaming M&A deals of tomorrow are beginning to reflect that.

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