High Interest Rates Put Casino M&A Activity on Hold

Mergers and acquisitions in the casino industry seem to have slowed down, as steep borrowing costs continue to discourage big deals. Talks at the recent Global Gaming Expo (G2E) in Las Vegas suggest that the usual excitement around deal-making has died down this year.

Caution Dominates G2E as Casino M&A Waits for Interest Rate Relief

Research from Stifel analyst Jeffrey Stantial shows that executives and investors at G2E were cautious, not ambitious. He noted that financial problems for pricey properties on the Las Vegas Strip keep potential buyers waiting. With borrowing still expensive, few want to make big purchases until interest rates drop more.

This uncertainty has a big impact on Caesars Entertainment, a company that people have long thought might sell one of its Las Vegas Strip casinos to cut its debt. Stantial’s study shows that this kind of sale will not happen anytime soon, because there are not many buyers with enough cash. Right now, it is just too expensive to borrow money for big purchases. Hence, companies are more likely to hold off and wait for interest rates to go down, which many think will happen in the next year or two.

The regional casino market faces a similar situation, with few top-notch properties up for grabs. Experts point out that many available assets fall into the lower-tier category, which does not excite major operators looking to grow. This has led many buyers to play the waiting game instead of jumping into deals that might not boost their portfolios.

As Mergers Slow Down, Century Casinos Weighs Choices and Focuses on Canadian Sites

Century Casinos stands out from the crowd. They are taking a hard look at their business, which could result in selling some of their properties. Industry watchers think their Canadian operations, which have been valued higher than US assets, might be the first to go. However, do not expect them to sell everything off anytime soon. 

Beyond regular casinos, some focus is moving to new digital areas prediction markets and online sports betting. A recent boost in funding for prediction markets has caught the eye of online betting companies looking to buy up strategic assets. Yet, regulators are watching. Several US states have cautioned that ventures into event-based contracts might put existing gaming licenses at risk.

Right now, the casino industry seems to be in a wait-and-see mode. While small add-on deals might still happen, big mergers are likely to stay rare until borrowing gets cheaper.