Could Scientific Games break from tradition in 2022 with M&A bet on blockchain or NFTs?
Acquisition-hungry Scientific Games has not ruled out further purchases in 2022 and is keeping a particularly close eye on the disruptive technologies space.
Last year, the Las Vegas-based supplier bought content studios Lightning Box and ELK Studios and even entered the live casino vertical for the first time with a deal for Authentic Gaming.
A transformative 12 months also saw Scientific Games sell off its lottery division to private equity giant Brookfield Business Partners for $6.1bn and its sports betting division to Beverly Hills-based media giant Endeavor for $1.2bn.
Now boasting strategic clarity and a menacing M&A war chest, further consolidation could be on the cards as the business continues to invest in content-led iGaming production.
“The market is very buoyant at the moment and we’re always looking for businesses that can help us achieve our growth ambitions,” Scientific Games iGaming CEO Dylan Slaney told iGaming NEXT.
“When we talk about content being the lifeblood of any entertainment business, then obviously if we can bring even better content to players and into our markets globally, that is something that we’re very interested in.”
Last year’s acquisitions made sense. With Lightning Box and ELK, two successful and well-established content studios joined the SG roster to broaden its portfolio and provide a level of exclusivity, while Authentic Gaming was a necessary purchase to catapult Scientific Games into the live casino arena.
Live is hugely popular and is growing in the all-important US market. To say the vertical is dominated by stock market darling Evolution is an understatement, but Playtech – a long-term rival of Scientific Games – is arguably the Swedish provider’s biggest competition, for now.
With those businesses secured and their integrations progressing, Slaney is now monitoring the development of emerging technology, including blockchain and non-fungible tokens (NFTs). Could this mean a slightly more experimental approach to future M&A for Nasdaq-listed Scientific Games?
“There are some interesting spaces on the technology side,” said Slaney. “I don’t think as an industry we’ve truly understood the impact of blockchain and how that can help the industry to achieve not just its growth goals, but also help with compliance and from a regulatory point of view.
“I think the world of NFT gaming is also something that is getting more airtime and more credence and ultimately will play a major role in our industry as well over the coming years.
“We’re keeping our ears close to what’s happening and if we can find businesses that bring new content or experiences to players, or that help us to be more efficient from a technology point of view, then absolutely through acquisitions and through strategic partnerships will we look for ways to improve what we deliver to our players and operators,” he added.
Investors have been mostly supportive of the firm’s big-picture strategy. For example, the share price peaked at a six-month high of $89.08 per share on 27 October 2021 – the same day the lottery division divestiture was announced.
Since then, however, the price has dipped to $61.42 at the time of writing, with stock market reaction to the Authentic Gaming and ELK Studios acquisitions underwhelming.
Investing in en vogue technologies might bring the buzz back to Scientific Games. Hot iGaming stocks such as DraftKings and Entain have made no secret of their intention to branch out beyond gambling and into collectible NFTs and esports respectively, for example, and it appears to be a narrative that investors can get behind.
“There are some amazing things happening in that space and I think it’s just part of the future evolution of the broader entertainment content business that we play a major role in,” said Slaney. “Those areas interest and excite us because they are new.
“We know players are gravitating towards those areas, so we are always looking at how we can shape our own destiny and harness the future growth pillars of the industry.”
But Scientific Games won’t splash the cash without caution: “Having said that, we’ve also got a lot to do,” said Slaney. “We want to make the most of the  acquisitions but we’re always looking a little bit further ahead about where we think the industry might be going and we’ll start to place some bets on some of those emerging technologies and emerging industries as well,” he concluded.