Research Firm Suggests Evolution Group as Possible Participant in Live Dealer Acquisitions
In the bustling US live dealer market, Evolution Group (OTC: EVVTY) is witnessing a decline in its share, raising questions about whether it'll become a buyer or seller in the ongoing industry consolidation.
A recent analysis by Eilers & Krejeck Gaming (EKG) points to the Swedish company facing challenges in the US due to intensifying competition, particularly from Aristocrat Leisure. While Evolution is still growing in North America's live casino sector, its success in the random number generator (RNG) segment is questionable.
"It's evident that Evolution is finding the US market more challenging, especially in the slots area," according to EKG. "The company has previously looked to solve problems through acquisition, such as buying Ezugi in the early-stage US live casino market or NetEnt in Europe and Asia.
EKG suggests that IGT's (NYSE: IGT) online gambling arm could be an intriguing possibility for Evolution if it's seeking to expand its market presence. In addition, there are rumors of Apollo Global Management (NYSE: APO) exploring the possibility of acquiring IGT's global gaming business. If Evolution were to acquire IGT's internet division, it could create a juggernaut in the live dealer industry, as both companies are the leading players in terms of Gross Gaming Revenue (GGR) by suppliers.
However, both companies are facing challenges in maintaining their market share, potentially instilling concerns among investors about the benefits of a tie-up. "Evolution is still number one with a 21% market share, but that's down significantly from 28% in October last year. IGT has experienced a similar decline, going from 22% to 17% in that period," added EKG.
Likely More Buyer than Seller
At a market cap of nearly $19 billion, Evolution seems more inclined to be a buyer than a seller. Apart from Aristocrat and potential private equity firms, the pool of potential suitors for Evolution is limited. Additionally, a potential takeover of Evolution would involve a complex restructuring process that may not immediately appeal to potential acquirers.
To make itself a more attractive target, Evolution may need to divest its Asian and gray market operations. Private equity money, which would likely aim to implement a similar restructuring process, could be a potential source of funding for such a transaction.
The iGaming space, including live dealer concepts, is widely considered to be ripe for consolidation. As such, it's possible that an uptick in M&A activity could prompt Evolution to make strategic acquisitions to shield itself from unwanted takeover attempts.
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Source: www.casino.org
