Sportsbook operators: a winning bet for investors?
The relative scarcity of strong online sportsbooks could put operators of these in pole position to benefit from the unfolding sector consolidation play in 2010, says Ed Birkin, assistant vice-president at Barclays Capital.
The online gaming industry is clearly in a period of transition with regulaÂtion both in Europe and in the US, and consolidation the focal points for many investors. While regulation has clearly been gathering momentum over the past 18 months, it will continue to be a slow process.
Consolidation has been mooted as the key theme this year, and it is a widely held belief that one will look back and view 2010 as the start of large-scale sector M&A “ while companies have always maintained open channels of communication, the prospect of a tie-up between two of the industry’s largest operators already has invesÂtors salivating.
Musings about consolidation are nothÂing new to eGaming Review, with the benefits of a global (or, at the moment at least, Europe-wide) footprint, prodÂuct diversification and the upside from operational gearing having already been highlighted on these pages. HowÂever, I couldn’t resist taking a slightly different tack and looking at the potenÂtial beneficiaries of this.
The most successful deals in any M&A theatre are those that can generate the highest upside, be it through acÂquiring a materially undervalued comÂpany, or more likely in this case, the combination of two complementary businesses.
Although this could work on both product and geographic mix, complementary products would appear to be the key for the online gaming sector “ in simplistic terms, combining a poker/casino platform with a top-class sportsbook. Given the relative scarcity of strong sportsbooks in the online arena, it is logical to assume that quality sportsÂbook operators are in a strong position.
Current share prices do not appear to contain any M&A optionality as yet, despite the potential upside and hype surrounding this. While the ultimate beneficiaries of consolidation remain unknown, quality sportsbook operators could be a winning bet.