The North American sports betting industry has experienced a surge in mergers and acquisitions this year, as operators seek to enhance their technology and expand into new markets. Investment bankers on Wall Street are anticipating a continuation of this trend in 2025, driven by online sportsbook companies aiming to improve customer acquisition and retention through technological advancements and exploring new growth opportunities like internet lottery.
For instance, in February, DraftKings (NASDAQ: DKNG) announced a $750 million acquisition of the lottery provider Jackpocket, highlighting the ongoing consolidation in the industry. Chris Grove, partner emeritus at Eilers & Krejcik Gaming (EKG), mentioned at the Global Gaming Expo (G2E) that betting operators are expected to show similar motivations for mergers and acquisitions over the next year, with a focus on five key areas. These include investments in customer relationship management technology and back-office capabilities, as well as free-to-play games designed to attract new customers.
Grove also noted that significant movement in sports betting and media combinations is unlikely in 2025, as previous deals have not met expectations for buyers.
The need to improve parlay offerings, particularly same-game and in-game parlays, could be another driving force behind the consolidation in 2025. According to Grove, any technology that allows operators to better price parlays will be highly sought after. Despite the recent wave of acquisitions, there remains plenty of market opportunities (with companies like GiG, Huddle, Kambi, Kero, nVenue, and Swish) to consider. Evidence of this trend can be seen in DraftKings’ August announcement of its purchase of Simplebet, suggesting that other operators may also look to strengthen their parlay offerings through acquisitions next year.
iGaming also presents a promising area for acquisitions in 2025. However, buyers are more likely to focus on acquiring technology providers rather than direct competitors to increase market share.
Compliance and regulatory issues, such as cybersecurity and geolocation, pose significant costs for online sportsbook operators. Reducing these expenses could drive gaming companies to pursue related acquisitions, but according to Grove, the financial dynamics can be complex.
Payments remain another area where operators seek cost savings through consolidation. Although reducing payment processing costs is attractive, Grove predicts that this theme is less likely to impact the market by 2025. He pointed out that managing payments is both a logistical and liability challenge in the US. For example, FanDuel spends 6% of its Net Gaming Revenue (NGR) on payment costs. While the in-house management of payment processes seems inevitable, Grove is pessimistic about significant changes occurring in the short term.