slots mergers and aquisitions

A cursory glance at the movements in the slot game industry over the past year or so would suggest that the firms are involved in a seriously big land grab.

Several gaming giants have been buying up slot machines manufacturers, with some eye-watering billion dollar deals being hammered out month after month.

Are we witnessing copy-cat movements from global gaming companies, who don’t want to be out-manouvered by their competitors or are we gearing up for something much bigger?

Scientific Games have been busy
In January last year, one of the big slots giants, WMS (Williams Interactive), was taken over by US firm, Scientific Games Corp. The merger went ahead in October of the same year to give the innovative firm a foothold in the USA gaming market. Scientific was originally a leading developer of tech and content, but with this deal they suddenly propelled themselves into becoming a leading distributor of slot game technology.

The deal was the biggest in the leisure industry for many years, and Scientific Games are not stopping there. In August of this year the firm confirmed they were buying Bally Tecnologies, the gaming provider who have stocked Vegas casinos with profitable games for decades.

But slot machine giant Bally themselves acquired SHFL Entertainment in July 2013 in a $1.3 billion deal. (SHFL – previously gaming developer, Shufflemaster – makes table games and slot machines from its Nevada base).

Aristocrat haven’t rested on their laurels
In July this year, Australian slots giant Aristocrat bolstered its North American business with a $1.28 billion takeover of US gaming company, Video Gaming Technologies.

With the buy-out, the Sydney-based player tripled its business in that part of the world, with the company’s slot machines presence growing from 8,200 to 28,400 in North America alone.

Amaya Gaming, a Canadian firm, completed a deal to snap up slots manufacturer, Cadillac Jack. Although it fair to say that Amaya have not just focused their attentions on slots with deals to takeover Pokerstars and Full Tilt Poker in August this year.

The IGT buyout has raised the most eyebrows
Possibly the most significant deal of the all, if it eventually goes through, is the potential takeover of IGT by the Italian lottery group GTECH. Although there has been some rumblings of funding issues, GTECH have now agreed credit lines of $2.6 billion with a syndicate of banks. The deal would see a major Las Vegas slots manufacturer end up in the hands of a company largely based in Europe.

So, what’s going on? And why have the traditional US land-based firms succumbed to overseas cash?

Well, unless it’s something that has gone completely under the radar of our well drilled slots analysts, then it looks like a classic case of mergers and acquisitions. With a view to be ready for a regulated US market in the coming years.

In Aristocrat’s case, at least, revenue is falling off in its native Australia. State governments are busying themselves with various crackdowns on ‘pokies’ (the Aussies’ term for slots) as anger grows about the nation’s rising problem gambling.

Pokies constitute most of Australia’s gambling, with a report produced this year suggesting some 60% of the $16.3 billion spent on gambling in Australia was made up of pokies wagering.

So too, GTECH are moving away from a struggling domestic market back home. Red tape, online gaming restrictions saw revenues reduced by almost 7% in Italy last year, with the USA’s rising by the same margin.

With all these consolidations and mergers, we seem to be moving away from multiple developers all doing the same thing to creating rival camps of super-powers.

Similar things happened in poker, with bwin and Party merging while PokerStars bought out Full Tilt. In those cases, the only effect on players was a little less choice. For the companies themselves, a nice stock market float and entry into the burgeoning U.S. market.

U.S. Gaming regulation could be the catalyst
Could the legal situation in America be playing a part? Nevada, Delaware and New Jersey have legalised online gambling, including slots and table games in the cases of Delaware and NJ, while more states continue to debate either new land-based legislation or online compacts with existing casino operators.

In New Jersey, online sites like 888 and bwin.party are complementing their brands with bricks ‘n’ mortar deals. Before being bought out by Amaya, PokerStars tried (and failed) to buy the Atlantic Club in Atlantic City.

Buying up major land-based players like Bally and WMS seems the smart move for online tech firms keen to gain a bigger stranglehold in a market that could explode (or fizzle out, depending on your standpoint) in the next 5-10 years.

But that doesn’t explain Bally’s takeover of ShuffleMaster. Bally themselves, however, cite a look outside the US: “We now have more of a focus on international business, and we are even focusing more on product development for international markets,” said Senior Vice-President of Bally, Neil Davidson last year in an interview with Global Gaming Business Magazine.

“Prior to the acquisition [of ShuffleMaster], we did good when looking into international markets; I wouldn’t say we did great. But now, we’re looking forward to a broader international footprint.”

With the Scientific Games deal to buy WMS, it’s more a case of a lottery company that bought out a slots firm.

Gaming stock analyst, Frank Fantini, said: “They’ve [Scientific Games] tried through their fixed-odds betting terminals and elsewhere to get into the machine business, but now with this purchase, in one fell swoop, they have become one of the worldwide leaders in slot machines and related products.”

More mergers should follow in the next year or so, with smaller firms, like Amaya, looking to consolidate their various skills and experience sets.

Expect more slots developers to be targeted over the next six months, with slots manufacturers and consumer facing gaming brands with a long history becoming the target for companies with deep pockets, but possibly no major experience in this niche sector.

And what about the games? The slots are what made these companies famous in the first place, so if they fail to hit the right note with future releases will players start deserting these brands. Our guess is that most of them can survive on their back catalogues for a long time to come.

5 Possible targets for 2015

1. Novomatic – The Austrian slots giant would possibly eclipse all the other deals so far. Has anyone got an appetite for the Book of Ra or Dolphins Pearl?

2. Konami Gaming – An Asian slots manufacturer with a global presence in casinos. They could be ripe for a take over.

3. Aruze Gaming – This global slots manufacturer has an impressive portfolio of games and could be the next big target.

4. Incredible Technologies – Although smaller in size, IT offers a nice range of slots and even a small range of online titles too.

5. Ainsworth – Possibly the least likely to be next, but this Australian company has a rich heritage and some very exciting slot machines.