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  • Tekkorp Capital founder Matt Davey: “MGM remains most suitable Entain buyer despite PE interest” 
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A prominent gaming industry investor believes MGM Resorts remains the best fit for an outright acquisition of Entain, with the latter reported to be interested in selling off assets, and that a buyout in the BetMGM joint venture (JV) would be “compelling.”  

Matt Davey is the founder and chairman of private equity investment company Tekkorp Capital and is a former CEO of suppliers SG Digital and NYX Gaming Group. 

Speaking to NEXT.io, Davey touched on several issues regarding M&A and investment in the gaming industry, including what is likely to happen to Entain and BetMGM. 

The possibility of Entain being acquired has been widely discussed in the industry, with recent reports suggesting the operator is looking to offload a number of its sports betting and gaming brands. Private equity group CVC Capital Partners and asset management company Apollo Global Management are among the interested parties, according to The Sunday Times. 

Jette Nygaard-Andersen stepped down as CEO last December amid shareholder unrest due to what some saw as a rush to do too much M&A too quickly.

Davey said: “I absolutely think Entain is the kind of business private equity should be looking at, even if that’s not us. I still think MGM Resorts is the best buyer of that business, but I’m not surprised to see interest from others.

“We saw a similar approach for the William Hill assets that Caesars Entertainment sold off [when 888 Holdings bought William Hill’s non-US assets for about $2.35bn in 2022], as there was definitely interest from private equity at that point too.” 

End of the JV? 

The BetMGM JV was formed between MGM Resorts and Entain (then GVC Holdings) in July 2018, just two months after PASPA was overturned, but BetMGM has been struggling to compete with FanDuel and DraftKings.

For 2023, FanDuel’s parent company Flutter Entertainment reported US revenue of $4.48bn, while DraftKings generated $3.67bn in revenue. By contrast, BetMGM’s net revenue for the year was $1.96bn. 

Doubt was cast over the collaboration last October when Nygaard-Andersen said “joint ventures don’t last forever” at the G2E conference in Las Vegas. 

When asked whether he sees one operator buying the other one out of the JV, aside from an overall acquisition, Davey said: “There has been a lot of posturing, and both companies might want to do their own thing independently. I think the industrial logic of bringing those assets together is compelling. I would not be surprised if despite the posturing, we see a deal happen there.” 

US is not impossible 

Focusing on the bigger picture in the US, Davey believes it is still possible for the three most prominent sports betting operators of FanDuel, DraftKings and BetMGM to be broken up, but almost six years on from the overturning of PASPA, this will be very difficult for any operator to achieve.  

Penn Entertainment’s ESPN Bet has shown early promise since its launch in November, holding an 8% market share on a cash handle basis, according to analyst Barry Jonas of Truist Securities. This is just behind BetMGM’s 9%, although its true position is difficult to determine so soon after launch with all the noise around promotions. 

While 38 US states plus Washington DC and Puerto Rico currently offer legal sports betting in some capacity, the possibility of California and Texas joining those states is potentially seen as a game-changer, but Davey does not forecast radical change in that regard.  

“I think, from looking at the UK, there is evidence that it is possible to break into the top three,” Davey said. “Sky Betting & Gaming is a great example of that. They moved from 9th/10th to a podium position across a four to five-year period.  

“I think it’s absolutely possible to break up the market leaders, but there are a couple of challenges. You need to have the balance sheet and the long-term vision to potentially break in, but it’s not easy. The incumbency of the larger players is very hard to shift. It’s definitely not impossible, but it’s going to be hard.  

“Opening up new states won’t necessarily change the market structure. In fact, it puts more fuel into the market leaders.” 

M&A in Brazil 

Another market frequently coming up in industry discussions is Brazil, and this is an area where Davey foresees plenty of M&A activity in the coming years. The regulated sports betting and online casino market in Brazil is expected to be live by July.  

Davey said: “I think it’s an incredibly competitive market already. I think a lot of the domestic operators will be in pole position there. The knowledge of the local market and the preferences mean a lot of the local operators will capture most of the value.

“That said, I think all the major scaled international operators will go into Brazil, and so I think we will see M&A driven by international businesses buying local operators.” 

Regarding other markets in Latin America which could be lucrative for investment, Davey said: “Peru and Chile will become very interesting markets and Mexico is still a market that operators desperately want to get into. They just haven’t found the right method to onboard themselves into that market.” 

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