Gambling M&A more about acquiring staff than shedding
Managing staff has always been one of the trickiest areas to handle in mergers and acquisitions (M&A), but the employee shortages and skills gaps facing the gaming and hospitality industry have made human resources a key focus.
According to a blog from the Harvard Business Review, in traditional M&A deals about 30 percent of employees could expect to lose their jobs when companies in the same industry merge. That’s because one of the key drivers for M&A in many sectors is to achieve economies of scale and cut costs.?
However, the wave of deals in the gambling sector over the past few years has had a different driver, which has put staff retention at the centre of the equation.
Acquiring staff skills
“The M&A market has been hot because companies have been trying to acquire different skill sets,” said Donna B. More, a gaming lawyer and partner with U.S. firm Fox Rothschild. “Casino companies have been acquiring online gaming, or supplier entities to online gambling. For the most part that requires keeping the staffing as that’s why they are acquiring.”
Since the U.S. Supreme Court struck down the Professional And Amateur Sports Protection Act in 2018, more than two thirds of U.S. states have raced to legalise sports betting. With estimates of the total addressable market running into the tens of billions few companies could afford the time to build up in-house expertise, or the technology needed to take advantage of the new opportunities.?
Hence, the rush of mergers and acquisitions often between U.S. and European players, where sports betting and online gambling has been established for decades. Some big names included Caesars Entertainment’s purchase of William Hill, which then went on to sell the non-U.S. assets to 888 Holdings. It also saw MGM Resorts form a venture with Entain to form BetMGM, with the Las Vegas-based operator spreading further into the online space with the purchase of LeoVegas this year.?
Fox Rothschild’s More said that in terms of cost synergies through shedding staff after gambling mergers, there may be some opportunities in the backend, but not many.
Post-Covid shortages remain
“In Chicago, there are signs everywhere looking for people. If you managed to acquire staff it’s a good thing,” she said.
The hospitality and leisure sector is still struggling to return to its pre-Covid staffing levels, with many having been laid off and choosing not to return to an industry with often unsociable hours.?
Seth Schorr, CEO of Fifth Street Gaming, recently told SiGMA News that the company’s biggest challenge is the labour market.?
“We actually see more demand than we’re able to supply. Whether that’s in our restaurants or our casinos. It’s very frustrating as an operator when I have a customer that wants to play craps and I can’t open that third game because I don’t have the dealers. I think that’s going to change, but right now that’s where we’re at.”?
Aside from staff shortages, Covid has fundamentally changed the work culture in a great number of countries, which has also thrown up challenges for M&A.
Changes in employee behaviour
Law firm Allen & Overy says these changes have presented a new set of legal and organisational issues for any companies considering acquisitions.?
Covid drove a move for employees to be able to work flexibly and remotely. The firm said this creates issues as to the employer’s liability for tax and social security payments when a staff member works in a separate jurisdiction.?
It has also blurred the distinction between full-time employees and contractors on a freelance basis, with the latter in reality working full-time. These “disguised employees” are an issue in many jurisdictions, the Allen & Overy report said.?
Another staffing factor playing a part in transactions has been gender and race in the workplace culture, which it says is “playing a bigger part in transactions and in the calculations of buyers.”
Staff culture concerns
“Acquirers are now likely to put a far greater emphasis on such concerns as part of the due diligence process than ever before as they seek to unearth whether the target company has outstanding metoo, or broader discrimination or bullying issues,” it wrote. “We have even seen buyers walk away from deals where such concerns have been brought to light.”
Although the pace of gambling mergers is seen as slowing due to the weakening economic outlook, handling and retaining key staff will remain a key headache for the deals that go ahead.?
Join us: 14 – 18 November 2022 MALTA
One of the first European countries to regulate the gaming sector, Malta is a hub of global business. The island is an obvious choice for SiGMA’s presence in Europe and a strong foundation for the field’s future. With a plethora of prospects for both investors and entrepreneurs looking to shape the future of this multi-billion-dollar business,?Malta Week?will bring together industry giants among the affiliates, operators, and suppliers of the gaming sector.
