M&A Wave Could Hit Macau Hard
A senior investment adviser at financial services company Shaw and Partners has sparked a wave of fear within the gambling industry this week by predicting that there will be rapid growth in merger and acquisition deals. He went as far as to suggest it would happen within land-based casinos globally and experts confirm that slowing organic growth and drop in revenue could make this very likely.
A merger or acquisition usually takes place when an industry starts to struggle, essentially it is the rich picking off the weak, but what is interesting about this claim is that the gambling sector, in general, is currently undergoing a growth period. It is telling, then, that Adam Dawes, a senior investment advisor at Shaw and Partners, says the land-based casinos will be hit hard, particularly those in the Asia Pacific region. For hubs such as Macau, the news could be devastating.
Dawes said: “I think some of the big U.S. players will probably try growth by acquisition as in popular gambling cities like Las Vegas and Macau, organic growth is not as strong as before. Macau was the growth engine — that has slowed down. You’ve got Vegas, which is the old world, but that’s not all so fiery. In other parts of the world, it’s harder and harder to find sites that gamblers will visit.”
He predicted that consolidation will take place because gambling companies have fewer options left to develop and grow their business, apart from going online. He said, “To find growth for these companies, they either have to buy somebody out, or consolidate with each other — so like a merger, or an aggressive takeover — to generate the sales and to generate the growth going forward.”
Gross revenue dropped 8.3% in April for Macau’s gaming industry from last year and Las Vegas recorded a 3.8% drop in revenue in March of this year compared to March 2018.
Growth Areas That May Be Targeted
Despite some recent success in Australia, after the news about Macau and the Asia Pacific region in general, it is believed that these two areas will be targeted for merger and acquisition deals. In Dawes’ opinion, US casino companies have “deep pockets” and could be “hunting around” for new casino assets that could increase their growth. He believes that “Australia’s ripe for that picking” and that the Asia-Pacific is a region that various companies have set their sights on.
Two casino operators down under, Tabcorp and Tatts Group, merged nearly two years ago. That merger is believed to have worked very well and the deal has given the company the ability to compete on a global scale in the gambling industry although recent issues with Sun Bets have hit the company hard.
Just last month, Las Vegas giant Wynn Resorts was in early talks for the potential acquisition of Australian casino operator Crown Resorts for a huge $7.1bn (£5.5bn). However, Wynn canceled talks fast after word about the potential deal leaked. Dawes said that despite the deal’s failure, it “might accelerate some of the companies starting to look at different areas.”
Dawes is confident that gambling companies could find growth in the Asia Pacific. While the U.S. population is slowing, he seemed confident of a potential round of merger and acquisitions. “The Asia Pacific is definitely firmly in that emerging market slash growth area,” he said.