Market Watch: No sign of slowdown in US deal momentum for publicly listed affiliates

The Better Collective deal for RotoGrinders in the US comes as no surprise with the pace of gambling and affiliate M&A gathering speed and as both more US states (such as Tennessee) look to regulate and companies within and outside of the gaming sector eye up its potential.

With that in mind, we expect to see significant M&A affiliate activity continuing in the US, including several large European players making these moves. The affiliate market has been an increasingly active target for buyers throughout the majority of 2018 as well as the early part of 2019, some of which have attracted buyers outside the gaming market for the first time. The current deal momentum in the affiliate space is the highest it has ever been, and the US will be a key contribution to this segment.

This is especially of note when considering that an overwhelming majority of the acquisitions are affected by the same buyers, largely publicly listed entities that are employing a renewed level of creativity around selection criteria, in an ongoing drive to increase share price. This means there will continue to be affiliate transactions that will be multi-market, cross-product and variable commission plans.

Affiliate acquisitions are expected to continue at the same rate for the next 18 months and well into 2020. While the level of capital for public buyers remains liquid (good, healthy cash-flow on their profit & loss statements) and under-invested (more assets than liabilities on their balance sheets), these players will continue to support their growth in market capitalisation with more M&A transactions. Market perception of these public players’ strategy will continue to be based on their rate (and type) of acquisitions, and a sudden change in buying behaviour may signal the beginning of the end of the affiliate sale boom.

Two years from now, it is likely that M&A decision-making will mainly (or solely) be determined by the public players’ share price; as most of the shareholder capital will now be vested.

Julian Buhagiar is an investor, CEO and board director to multiple ventures in egaming, fintech & media markets. Investments, M&As and exits to date in excess of $330m.