Fueled by decreasing interest rates and a more advantageous regulatory environment, the gaming sector, comprising casinos, may see an increase in mergers and acquisitions activities in 2025.
That was among the key points from Truist Securities' recent Wicked Good 12th Annual GLLR Summit in Boston. Since September, the Federal Reserve has reduced interest rates multiple times, and it is thought that President-elect Trump will encourage the central bank to keep this trend going. Reduced financing expenses may increase the attractiveness for potential buyers to raise debt for making acquisitions.
"The velocity of discussion has improved since the Fed started down the path of rate cuts, and further, operators are positive on a more favorable Federal Trade Commission (FTC) administration,” wrote Truist analyst Barry Jonas in a report to clients. “After a theorized and actualized year of M&A in gaming tech to right-size valuations, we think 2025 has the potential to be the year of gaming operator M&A. That being said, valuation expectations and bid/ask spreads will be key determinants.”
The analyst did not provide details about possible buyers or acquisition targets, although the 2024 speculation was lively yet ultimately lacking significant casino transactions.
New FTC May Assist Casino Mergers and Acquisitions
Trump has chosen current FTC Commissioner Andrew Ferguson to lead the commission — a decision that the investment sector and certain political analysts feel is likely to encourage further consolidation efforts.
During the tenure of Chairwoman Lina Khan, the FTC did not hinder significant casino mergers, partly because none occurred in recent years. Under Khan’s direction, the commission filed lawsuits to prevent Microsoft from acquiring Activision and to block the merger between grocery chains Albertsons and Kroger.
As new leadership is set to take charge at the FTC, the environment may become more favorable for significant consolidation across various sectors, including gaming.
Among the rumors of consolidation in the casino industry that surfaced this year, only Boyd Gaming (NYSE: BYD) potentially pursuing competitor Penn Entertainment (NASDAQ: PENN) would likely raise concerns regarding antitrust issues. That was merely conjecture, with neither company verifying that discussions took place, and Penn behaving as if it has no intention of selling itself.
Possible Spinoffs in Online Gaming
In his client note, Jonas pointed out another trend that may become significant in 2025: the potential for iGaming/online sports betting spin-offs.
The analyst indicated that the leadership at Caesars Entertainment (NASDAQ: CZR) is disheartened by the minimal recognition its digital operations receive concerning the overall stock price and may explore the option of unlocking value by separating that division. It may not be unexpected for Penn, the parent company of ESPN Bet, to contemplate a similar action since the interactive sector has been a burden on the operator's physical casino division.
“We think standalone iGaming could be an underappreciated opportunity, given Penn’s extensive land-based portfolio,” added Jonas. “We continue to see state tax revisions as the largest threat to Interactive gaming. Still, despite the real prospect of more tax increase bills next year, management teams thought the prospect for the bills succeeding was low.”