View from the City: M&A remains busy while uncertainty impacts deal valuations

The gambling sector has not been spared from the uncertainty in 2021. National lockdowns impacted land-based operations, regulatory processes faced delays, and key industry events remain under threat. One feature of the market that did seem certain, however, was continuous deal activity – a trend we see persisting into 2022. It is worth pointing out that the M&A observed in 2021 has arguably been some of the most diverse to date. We have seen:

• Transformational B2C deals led from North America (e.g. Ballys/Gamesys, Penn/Score Media) and with European focuses (e.g. 888/William Hill International)
• Increasing PE interest across the ecosystem (e.g. Bruin Capital/Oddschecker, Apollo and CVC’s failed bids for William Hill International), with significant scope for PE buy and build activity going forward
• Increased vertical M&A (e.g. Kindred/Relax) and further consolidation and acquisition in the B2B supply chain (e.g. Evolution/Big Time Gaming and the anticipated acquisition of Playtech)
• Strategic purchases in emerging geographies (e.g. Flutter Entertainment/Junglee (India))
• Evidence of differing strategies (e.g. Flutter Entertainment acquiring Tombola for a more casual, bingo-led base – while 888 sold its bingo operation to Broadway Gaming)
• Data providers looking at more media-led spaces (e.g. Genius Sports/Spirable, Sportradar/Synergy Sports)

While deals activity in the gambling sector remains busy, uncertainty is having an impact on deal valuation. Some deals are being built on assumptions of continued market growth while needing to be cognisant of uncertainty (e.g. timing, regulatory and fiscal uncertainty in North America), whereas others have had to explicitly consider the regulatory headwinds faced in the re-regulation of European markets. It is likely key stakeholders will continue wanting to see detailed diligence on how buyers are factoring that in.