Analysis: Was Red Tiger acquisition the catalyst for Evolution Gaming’s NetEnt interest?

Another day, another mega merger for the gambling industry. Sector consolidation is showing no signs of slowing down and, as some have predicted, the coronavirus pandemic may be hastening the need for gaming firms to come together.


Despite recent M&A (either completed or ongoing) involving Eldorado Resorts and Caesars Entertainment, Flutter Entertainment and The Stars Group, and DraftKings and SBTech, there is still an element of enormity to the latest deal on the cards: Evolution Gaming’s potential takeover of NetEnt.

Not only is the fee involved sizeable – SEK 19.6bn ($2.1bn) – it is a stark sign of how far Evolution Gaming has come; a company founded after NetEnt, one of the pioneers of online casino, is now ready to swallow NetEnt up.

For NetEnt itself, it is a sign the supplier has done something right in recent years. Ultimately, that may boil down to one particular move – an acquisition of its own.

Indeed, in September, NetEnt agreed a deal to purchase Red Tiger Gaming. Prior to that, the provider’s share price had been on the wane and NetEnt had become used to posting year-on-year falls in its quarterly financials.

But, after its Red Tiger acquisition, a financial analyst told Gambling Insider: "As you can see from the share price, it’s been quite well received. It’s up 30% in one week. It was on a five-year low before that. It’s come from a quite depressed share price level."

Imagine if NetEnt had not pursued its interest in the brand – could this moment have come? And would Evolution instead now be faced with a choice between acquiring NetEnt and Red Tiger alone?

The power of live

Evolution’s soaring recent progress had already demonstrated, unwaveringly, the power of live casino; but this move is the ultimate statement of intent.

Given NetEnt’s synergies with Red Tiger, both brands’ varying distribution channels and market access, it’s needless to say a deal makes sense.

Pioneering live casino, Evolution will now have a strong foothold in the slots market and, in terms of online casino, will rival any modern-day supplier already – let alone in a few years, when its current growth rate leaves limitless possibilities.

It is perhaps fair to say a slot supplier would no longer have the same leverage in terms of buying a live casino supplier in the current market, were the roles reversed – certainly not the foremost market leader of the vertical.

It takes one to know one

But it is not just about a live casino company representing its vertical; here we have a fast-growing company identifying another fast-growing company.

Before its takeover by NetEnt, Red Tiger was speculated to have been growing at a rate of 50%. NetEnt has duly benefited from this growth but so too now will Evolution – not least when it comes to its quarterly reports once any potential merger is completed.

It will be interesting to see what happens to Therese Hillman, NetEnt CEO, in any newly formed organisation. The same, too, applies for Gavin Hamilton, who has already faced the exact same situation – becoming NetEnt COO as well as Red Tiger CEO.

One may joke Hamilton could be getting bored of M&A but, in reality, nothing is probably further from the truth.

Red Tiger being involved in two high-profile industry mergers within such a short space of time shows just how far it has come; just as Evolution’s takeover offer shows how far CEO Martin Carlesund's firm has progressed.

But NetEnt’s recent M&A of its own has kept the company relevant and now made it central to this new equation. The supplier’s share price jumped SEK 56.00 to SEK 77.00 as news broke.

And it would not be a stretch to say NetEnt’s acquisition of Red Tiger may well have been the catalyst for Evolution’s interest.

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