The expectation of further mergers and acquisitions in the gaming industry will be the focus on March 17th during a roundtable discussion hosted by Gaming Laboratories International (GLI). The 22nd annual Regulators Roundtable, which will be held March 16-17 at Luxor Las Vegas, explores issues that the gaming industry faces.
One of the headlines is a session hosted by Joe Carlon, senior director of engineering, digital, with GLI, which will deal not only with mergers and acquisitions but also the compliance issues that come with that. The panel will include Chris Grove, an industry analyst with Eilers & Krejcik; Chris Soriano, chief compliance officer with Penn National Gaming; Greg Small, executive director of the Indiana Gaming Commission; and David Murley, deputy director of the Michigan Gaming Control Board.
Carlon said the gaming industry in the U.S. has seen unprecedented growth in sports betting and igaming in recent years, which has created new startups and expansion of existing companies. Sports and igaming operations have grown from other industries, traditional gaming, international companies, and formed partnerships with third-party support services (geolocation, identity verification, sports information feeds).
As this part of the industry takes hold in the U.S. and expansion across all segments of gaming continues, conglomerates will be formed that will impact regulators’ licensing, certification, technical deployments, and regulatory oversight of these companies, Carlon said.
“It’s an exciting topic, and one at the forefront of everyone’s mind no matter which area of the industry you are in, whether you are a regulator, supplier, operator or a test lab like us,” he said.
Carlon explained that the purpose of the roundtable is to provide the regulatory audience with this background and the challenges they’re going to see.
“We see acquisitions and mergers in the gaming industry as very prevalent in the coming years,” he said. “The panelists will provide insight on expectations of what the mergers and acquisitions may look like, will project that out including the driving forces behind this change, and discuss what it’s like to go through the process. There are challenges with financing, licensing, and, from the regulatory side, a couple of executive directors who are going to talk about the challenges they face. Regulators are charged with oversight, and there’s steps that need to continue to be followed even as the complexities of these deals are ever-increasing.”
Carlon talked about how gaming in North America has expanded so much in recent years on the sports and igaming side. Positioning in this space has already begun. Scientific Games has rebranded to Light & Wonder. Caesars purchased UK gaming company William Hill. Companies will likely see a need to focus on their core competency, whatever that is, from running casinos to a sports betting brand, or from a technology supplier focused on any or all of sports betting, igaming or gaming machines on the casino floor.
Casino operators may try to gain more market access and take sports betting brands national across the U.S. In this case, they may be looking to acquire operations to expand their network and even own their own technology. Technology suppliers who are sports-focused or game-content-focused see the need to deliver the other side, Carlon said.
Companies may also look to expand their brands to access customers. An example of that is DraftKings acquiring Golden Nugget Online Gaming for $1.56 billion. People know DraftKings for sports betting, but some customers may be looking for a more casino-centric brand, Carlon explained.
“To grow, you may need to do that through acquisitions,” he continued. “To do it organically with how fast the industry is changing might not work. You could be left behind. You need to focus on your core competency and look at pieces that you feel you need to add for your business strategy. That’s why we as a test lab can monitor what our clients are doing and how they may come together to form new relationships in the future.”
When an acquisition occurs, Carlon said they’re prepared when a product moves to a new entity. That also applies to divestiture when products are broken off, so Carlon noted that they can help with due diligence to ensure certifications are there.
“We are early on talking about these acquisitions and understanding new strategies and areas they’re looking to go into as they form these relationships,” he said. “We work to ensure processes and procedures are set up so that IP is protected and can flow to the newly-formed entities.”
Licensing will also be a big part of the panel discussion. When companies go through the process of merging, there likely needs to be a sign off by state gaming regulators. A company may not have a license in the target markets of the newly formed entity, or a startup being acquired may have never gone through licensing, Carlon pointed out.
“It’s important that the process pushes forward in line with all the other steps being taken to complete that merger,” he said. “Those approvals are underpinned on whether you can actually get over these regulatory hurdles and begin operating with the objectives you are looking at. Knowing when to engage regulators, the type of information that they need, and the process that is going to be followed and timeframe is incredibly important to understand as you put together a plan to go through a merger and acquisition.”
