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9 deals that could shape US sports betting this year, as pent-up demand for M&A could bring operators like Fanatics back to the negotiating table

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  • Sports-betting experts say there’s pent-up demand for M&A in 2023 after dealmaking slowed last year.
  • The path to profitability, diversification, and loyalty are some the themes underpinning deal talks.
  • Fanatics and MGM are among the buyers to watch, while PointsBet and Rush Street Interactive could be targets.

Sports-betting insiders say there’s pent-up demand for M&A in the industry after dealmaking slowed to crawl last year.

Dealmakers are still trying to read the tea leaves on when the global economy will recover, but they’re cautiously reigniting talks — looking to the spring and second half of the year. This comes after the investor focus on profitability and challenging economic conditions kept some transactions from getting over the finish line in 2022.

“With investor enthusiasm breathed back into the sector, buy-side M&A participants have inched their way back toward the negotiating table,” Lloyd Danzig, an early-stage investor and M&A advisor at Sharp Alpha Advisors, told Insider.

Several potential deals could be back on the docket this year, like Fanatics buying a gambling operator to supercharge its sports-betting strategy — it has ambitious plans to be in roughly 20 states by the end of the year — and FanDuel’s parent company Flutter listing on a US exchange.

“Subject to market conditions, I would expect to see a flurry of M&A activity in 2023 in the online gaming space in the US and abroad,” said Ramy Ibrahim, managing director advising gaming and other industries at investment bank Moelis & Company.

There’s also plenty of room for consolidation in the crowded and hypercompetitive industry that’s already racked up a few casualties, including the Fubo Sportsbook and MaximBet

“You’re going to see many smaller operators either shut down or consolidate,” said Jeff Roth, partner at Bruin Capital. “The focus is shifting from launching, scaling, and gaining share, to profitability.”

And several later-stage startups that raised money in the last year or two could be running out of runway in a tough funding environment and looking to make a deal.

“If the macro environment and capital markets stay the way they are, we’ll see more distressed deals,” said Rick Arpin, managing partner of KPMG’s Las Vegas office. He added: “Structurally this industry is still in need of significant M&A and other transition activity.”

Still, it’s expensive to borrow money right now, which could make it tougher for operators to finance transactions. And while some sports-betting stocks have rebounded in early 2023, the big declines over the last year have weakened the equity value of some potential buyers.

But, anyone with a strong balance sheet, including some US land-based casino operators, international players, and sports-betting-adjacent companies looking to break into the sector, could be buyers. They’ll be looking for deals that offer cost efficiencies, which means they’ll be scrutinizing and stress-testing M&A theses more closely than in previous years when speed to market was a key driver behind deal talks. 

“It’ll be interesting to see from an M&A perspective where you can reach cost efficiencies,” Slane said, adding that the overall “tightening of the belt” will likely remain prevalent in deal talks.

Some themes that could drive M&A in the sector this year: 

  • Path to profitability. This is the North Star underpinning most conversations in US sports betting these days, and it’ll be a priority in M&A. That may mean fewer media and other deals that don’t offer a clear return on investment or cost efficiencies.
  • Diversification into new verticals and brands. We’ll likely see more deals like DraftKings’ acquisition of Golden Nugget Online Gaming to expand into the online-casino business, or acquisitions of what insiders described as “local heroes” that have strong traction in key markets.
  • Loyalty. Casinos have been the leaders in loyalty, using rewards programs to keep customers coming back and cross-sell other products. Online sports betting hasn’t cracked that code yet, but it’ll be a big focus for operators this year. 

One thing we may see less of this year is operators looking to bring their entire tech stacks in-house, like when Bally’s acquired Bet.Works and PointsBet bought Banach Technologies. Technology is still important, but that kind of vertical integration makes more sense for operators who have significant scale.

“What we’ve learned in the past couple of years is that vertical integration maybe isn’t the panacea for these business models,” said Chad Beynon, gaming analyst at Macquarie. “It ended up being a much more expensive business to run than anyone originally thought.”

Here are nine potential deals industry insiders are watching in 2023, and how they could shake up the industry:

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