Potential Role of Evolution in M&A Activities within the Live Dealer Industry

Posted on: November 3, 2023, 03:28h. 

Last updated on: November 3, 2023, 03:28h.

Evolution Group (OTC: EVVTY), a leading player in the US live dealer market, may consider participating in industry consolidation to regain its market share. As the competition intensifies, particularly from Aristocrat Leisure, the Swedish company needs to adapt its strategy.

Evolution live dealer lawsuit New Jersey
One of Evolution’s live dealer studios in Atlantic City. The company is accused in a New Jersey lawsuit of doing unlawful business in countries where online gambling isn’t legal. (Image: Evolution Gaming)

According to a report by Eilers & Krejeck Gaming (EKG), Evolution Group has been focusing on its live casino business in North America rather than its random number generators (RNG). However, with declining market share, EKG suggests that Evolution may need to explore acquisition opportunities to stay competitive.

“The problem looks to be more on the slots side, with Evolution saying at its recent Q3 results it was still growing in North America live casino but not random number generators (RNG),” according to EKG. “The European powerhouse has previously looked to buy its way out of potential problems (see Ezugi in early-stage live casino in the U.S. or NetEnt in Europe and Asia).”

EKG highlights that International Game Technology’s (NYSE: IGT) internet business could be an attractive acquisition target for Evolution as it seeks to expand its market share. However, EKG also questions whether Evolution itself could become a target for acquisition.

IGT Unit Plausible Target for Evolution

In June, IGT announced its plans to explore strategic alternatives for its global gaming and PlayDigital units, opening up the possibility for Evolution to consider acquiring IGT’s online arm.

In September, reports emerged that Apollo Global Management (NYSE: APO), among other potential suitors, is interested in IGT’s global gaming business. A merger between Evolution and IGT in the live dealer market would create a dominant force, as both companies hold significant market share.

However, both Evolution and IGT are facing challenges with declining market share. This could raise concerns among investors about the viability of such a merger.

“Evolution is still the top player with a 21% share, but that is down significantly from 28% in the same period last year,” added EKG. “IGT has also seen its share decline during that time from 22% to 17%.”

Evolution Likely More Buyer than Seller

With a market capitalization of approximately $19 billion, Evolution is likely to be more inclined towards making acquisitions rather than selling. While there may be interest from Aristocrat and private equity firms, the pool of potential buyers for Evolution is limited. Additionally, any potential takeover of Evolution would involve complex factors that might deter prospective buyers.

“But Evolution would probably need to divest its Asian and gray market operations to facilitate such a transaction. The most viable option beyond that would be private equity investors who would likely pursue a similar restructuring strategy,” observed EKG.

Industry analysts anticipate increased consolidation in the iGaming space, including the live dealer segment. This could prompt Evolution to pursue acquisitions in order to fortify its position and ward off any unwanted advances.

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