FANTINI’S FINANCE: The Silence of G2E

With the recent mergers and acquisitions on the supply side, we’re unlikely to hear anything interesting at G2E because not all of them are complete. But the products? They speak for themselves.

This is the time when the gaming world, 30,000 strong, descends upon Las Vegas for the Global Gaming Expo.

As always, the biggest gaming technology companies will have large displays, celebrities, munchies, attractive young ladies, a whirl of sights, a cacophony of sounds, and private rooms for the oh-so-secret new stuff that everybody knows about.

However, several of the biggest exhibitors, IGT, Bally, WMS and Multimedia Games, will be quieter than usual. No special investor days or tours. No CEOs proclaiming. Just nothin’ but the products, ma’am.

For Bally, IGT, MGAM, WMS and Video Gaming Technologies are being bought out, and the lawyers will tell their naturally loquacious leaders to hush up.

Next year, there will be holes where once their exhibits sprawled. The holes won’t be obvious, as exhibits will be spaced apart, and their acquiring companies will expand their displays, no doubt.

But it is reasonable to expect the trade show floor will have less pizzazz.

Some might suggest this thinning out and toning down as an analogy for the supplier side of the gaming industry.

We’ve addressed these mergers before, mostly focusing on the added debt taken on by the acquirers, and the risks of trying to mold together and manage such sprawling and differing businesses.

But another challenge is managing through the promised cost cutting, in which the word synergy is often a euphemism for termination or demotion.

“I don’t know, Frank. We’ve just gone through this. I don’t know if we’ll survive the next one,” an executive of one company, which has been through one merger and now has to go through it again, told me.

And by survive, it wasn’t just whether this person’s job was at stake, but about the stress of wringing out even greater synergies.

On one hand, finding and achieving those synergies should be easier for companies that have done it before.

They’ve examined their operations for duplications so they know them well. They have their models in place and barely need to dust them off. They have freshly learned lessons to implement. They are battle-hardened, as it were.

And yet, for a company that has just cut tens of millions of dollars in expenses, having to find tens of millions more will not be entirely easy or pleasant.

Thus, as an army fights with the spirit of its commander, these mergers will succeed commensurate with the spirit, vision and integrative abilities of its CEOs.

As such, investors trying to figure out what these companies will be like after their mergers should take leadership into consideration, along with the financial projections and proclaimed strategies.

 

We’ll See You At G2E

Last year, we at Fantini Research and Fantini’s Gaming Report took a new approach to G2E.

We abandoned our annual pre-G2E reception, though it was a favorite of the many C-level executives and institutional investors whom we serve.

Instead, we put our resources into video interviews of CEOs and demonstration videos on the show floor of the products of which they were most proud.

It worked out so well—more than 12,000 page views on our website—that we’ve expanded this year to three full days of interviews and demos starting on Monday.

One interesting change we’ve noticed is the number of small technology companies seeking time in front of the cameras.

It’s a testimony to the rapid change in the industry, and perhaps a harbinger of the pizzazz that will return to the G2E floor after so many giants are gone.

Look for our videos starting Monday afternoon at www.fantiniresearch.com.

Articles by Author: Frank Fantini

Frank Fantini is principal at Fantini Advisors, investors and consultants with a focus on gaming.