Sports Betting M&A to Be Driven by New Products, Tech, Says Expert
This year has seen a lively pace of mergers and acquisitions in the North American sports betting sector, as operators seek to purchase to enhance their technology and gain access to new markets.
One expert thinks a comparable rhythm will emerge in 2025 as online sportsbook firms aim to enhance customer acquisition and retention strategies and technologies while expanding into new growth areas, like internet lotteries. One instance of that theme is DraftKings (NASDAQ: DKNG), which announced in February that it acquired lottery provider Jackpocket for $750 million.
"We expect betting operators to display a similar mix of M&A motivations in the next 12 months with interest in five key areas,” said Chris Grove, partner emeritus at Eilers & Krejcik Gaming (EKG), at the Global Gaming Expo (G2E) earlier this week. “We might see interest in customer relationship management tech and other back-office capabilities. Free-to-play games designed to feed acquisition funnels are another category to watch.”
He mentioned that there probably won't be significant changes in 2025 regarding sports betting/media partnerships since previous agreements haven't met buyers' expectations.
Parlays May Propel Mergers and Acquisitions in Sports Betting
The necessity for operators to enhance and refine their parlay options, especially those related to same-game and in-game types, might be another factor that propels consolidation in 2025.
“Anything that allows an operator to price better, especially for parlays, will be of interest. Despite the rash of recent acquisitions, there’s still plenty in the market (GiG, Huddle, Kambi, Kero, nVenue, Swish),” added Grove.
This year has shown signs of such actions, including DraftKings' announcement in August regarding its acquisition of Simplbet. Other operators appear to require enhancements in parlay menus, suggesting potential deal-making might occur in 2025.
Grove highlighted that iGaming may be a promising area for acquisitions next year, but buyers are likely to focus on acquiring technology providers instead of direct competitors to increase market share.
Adherence and Payments May Also Trigger M&A
Regulatory and compliance challenges, such as cybersecurity and geolocation, are realities for online sportsbook operators, and they are costly as well. A decrease in those expenses might drive gaming companies to seek relevant acquisitions, but EKG’s Grove remarked that “economics can be complex.”
Regarding payments, operators are certainly eager to achieve cost reductions in that area, and they might use consolidation to reach that goal, but this issue is probably farther off than 2025.
“It’s a massive cost center and a critical part of the user experience, but it’s also a logistical and liability nightmare in the US,” concluded Grove. “FanDuel, for instance, spends 6% of NGR on payment costs. We believe the in-housing of some part of the payments stack — maybe even most of it — is all but inevitable, but we are bearish about any of that happening in the short term.”
