The gaming industry could pave the way for more new mergers and deals this 2025, according to the experts at the recently concluded Wicked Good 12th Annual GLLR Summit held in Boston. In addition, the new Federal Trade Commission could make things easier for companies to consolidate.

The gaming industry, encompassing casinos and related gaming sectors, is all set for a resurgence in mergers and acquisitions activity in 2025, fueled by declining interest rates and a more favorable regulatory environment.

This optimism follows insights from the recently held Wicked Good 12th Annual GLLR Summit in Boston of Truist Securities. According to Truist analyst Barry Jonas, the Federal Reserve's ongoing interest rate cuts and a potential shift in the Federal Trade Commission leadership under President-elect Donald Trump are likely to lower financing costs and encourage consolidation efforts.

Lower interest rates boost acquisition potential

Since September, the Federal Reserve has initiated multiple rate cuts, creating an environment that is fairly conducive to borrowing. Jonas highlighted that this trend significantly enhances the appeal of issuing debt for acquisitions, making M&A activity more viable for gaming operators.

"The velocity of discussion has improved since the Fed started down the path of rate cuts," Jonas stated in a client report. "(Furthermore), operators are positive on a more favorable Federal Trade Commission administration."

Jonas suggested that after a year marked by M&A activity in gaming technology to adjust valuations, 2025 could emerge as the "year of gaming operator M&A." However, he emphasized that bid/ask spreads and valuation expectations would be critical factors in determining the success of these transactions.

Regulatory changes under new Federal Trade Commission leadership

A shift in leadership at the FTC could further catalyze large-scale consolidation in the gaming industry. Trump's nomination of current FTC Commissioner Andrew Ferguson to be the chair in the commission signals a potential departure from the regulatory approach of outgoing Chairwoman Lina Khan, who had taken a more interventionist stance in blocking high-profile mergers in other industries.

While Khan's FTC did not face any major casino consolidation cases, it made headlines by suing to block Microsoft's acquisition of Activision and the merger of grocery giants Kroger and Albertsons. Analysts believe Ferguson's appointment could pave the way for a more permissive regulatory stance, encouraging consolidation across various sectors, including gaming.

Despite 2024's active rumor mill, no significant casino deals materialized. Speculation about Boyd Gaming potentially acquiring rival Penn Entertainment remained just that - speculation. Neither company confirmed discussions, and Penn's management appeared uninterested in pursuing a sale.

Potential iGaming spinoffs

In addition to M&A activity, the online gaming sector could see notable strategic shifts in 2025. Jonas highlighted the possibility of spinoffs in iGaming and online sports betting as companies seek to unlock shareholder value.

For instance, Caesars Entertainment may consider spinning off its digital operations, which have not been adequately reflected in its overall share price. Similarly, Penn Entertainment could explore a similar move for its ESPN Bet platform, as its interactive gaming business has weighed on its land-based casino operations.

"We think standalone iGaming could be an underappreciated opportunity, given Penn's extensive land-based portfolio," Jonas noted. However, he cautioned that state tax revisions remain a potential threat to the interactive gaming sector. Despite concerns over possible tax increases, Jonas suggested the likelihood of such bills passing is low.

A transformative year ahead

As the gaming industry eyes 2025, the combination of lower interest rates, a more favorable regulatory framework, and strategic opportunities in the digital gaming space could drive significant transformation. While challenges like valuation expectations and tax policy persist, the overall outlook suggests a dynamic year for gaming operators and investors alike.

With a new FTC leadership set to shape regulatory approaches and financial conditions ripe for borrowing, the stage is set for the gaming industry to seize unprecedented opportunities for growth and consolidation.