Sports Betting M&A to Be Driven by New Products, Tech, Says Expert
This year, mergers and acquisitions in the North American sports betting sector have been active, as operators are acquiring companies to enhance technology and gain access to new markets.
One expert suggests that a comparable rhythm will emerge in 2025 as online sportsbook firms aim to enhance their customer acquisition and retention technologies while advancing into new growth areas, like internet lottery. For instance, DraftKings (NASDAQ: DKNG) 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 stated that there probably won't be significant changes in 2025 regarding sports betting/media partnerships, as previous agreements haven't met buyer expectations.
Parlays Might Fuel Mergers in Sports Betting
The demand for operators to enhance and expand their parlay options, especially for same-game and in-game selections, 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 seen signs of such actions, including DraftKings' announcement in August regarding its acquisition of Simplbet. Other operators appear to require enhancements to their parlay menus, suggesting that associated deal-making might occur in 2025.
Grove highlighted that next year, iGaming might be a promising area for acquisitions, but buyers are more likely to seek technology providers instead of acquiring direct competitors to increase market share.
Adherence and Payments May Also Trigger M&A
Compliance and regulatory challenges, such as cybersecurity and geolocation, are realities for online sportsbook operators, and they come at a high cost. Cutting those expenses might drive gaming firms to seek related acquisitions, yet EKG’s Grove remarked that “economics can be tricky.”
Regarding payments, operators certainly aim to achieve cost reductions in that area, and they might utilize consolidation to reach that goal; however, this concept is probably more distant 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.”
