Speaking at the iGB Live! event in the Netherlands, BlackStone Group Managing Director, Haide Hong answered questions from G3 about the investments Blackstone is making in the gaming sector
In a sector which is so vulnerable to changes in regulation what makes gambling so interesting to private equity?
Gaming is a large, global business with strong cashflow generation and opportunities to buy/create scale market leaders – hence the interest to private equity. It is right that regulation is a key risk and consideration whenever one evaluates investments in gaming – and we have a strong focus on that as part of our diligence process on every potential investment.
Following the crash what multiples is/are PE applying to acquisitions. Have they been reduced to in turn reduce exposure to the banks?
Valuation multiples ultimately have reference to the prospects and qualities of each individual business. But in general, multiples have increased (relative to the “crash” years of say 2008-11). We typically triangulate between EV / EBITDA, P/E and EV / EBITDA-Capex multiples.
What advice would you give to business owners attending iGB Live! who might be considering an exit strategy and want to make their businesses more attractive to suitors? Where does social responsibility rank in this?
Focus on having a cogent strategy and delivering on that. Prospective buyers will care about financial performance, scalability – but also the quality of the management team and assets they will be acquiring, and if there is a differentiated “story” they are buying into. ESG is an important factor – buyers would like to know that prospective acquisitions care about responsible gaming and that companies have a credible strategy around that.
How do you see the balance between online and land based. Is there a shift to investment to online or do you see them as separate entities?
Lots of industry research is out there, and there is general consensus that online gaming will grow faster than land based – but land based will continue to grow. As such, one should expect to see more investment in online, but land based gaming can still offer attractive opportunities.
Are the flurry of acquisitions leading towards an ultimate goal? What are Blackstone’s intentions for the gaming industry as it appears to be joining together strategic dots at this stage…?
We judge each investment as a standalone opportunity. With regards to Cirsa, the management team has had a tremendous track record of growing the business in Spain, Italy and Latam – so we look forward to supporting them on that journey.
Has the investment community’s opinion of gaming as high risk and high reward changed due to successful MICE and IR projects, or are there other factors at play?
Successful events do help to promote gaming as an industry – and can help to attract more investment into the industry. Certainly having gaming industry participants come to these events helps build a strong network with the investment community