A roll of the dice: PE goes to the casino

Apollo and Clairvest lead the way as private equity increases investment in the gaming sector.

The thrills and chills of wagering at the casino or racetrack are luring more Americans, and their wallets and pocketbooks, every day. And private equity investors are stepping up to the table.

PE Hub spoke with Apollo Global Management, a large cap investor, and Clairvest Group, which focuses on the mid-size market, about their approach in this space.

Apollo owns a string of gaming investments in the US and abroad. They include The Venetian, which was acquired from Las Vegas Sands for $2.25 billion, and the Great Canadian Gaming Corp, one of the largest casino operators in Canada, for approximately C$3.3 billion.

Recently, the Toronto-headquartered Clairvest Group, which has done over a dozen gaming platform investments over the years, partnered with ECL Entertainment to acquire licensed gaming assets that will enable them to build a gaming operation in Southern New Hampshire. The partners also acquired NHCG and The River Property & Hospitality Group, which operate the Lucky Moose Casino and Tavern and The River Casino & Sports Bar, both in Nashua, New Hampshire.

ECL is a gaming operator, which owns and operates multiple historical horse racing facilities in Kentucky, including the Mint at Kentucky Downs.

In 2021, the firm acquired Delaware Park, a racino (a combination of racetrack and casino) located in Wilmington, Delaware, which serves the Delaware, Maryland, New Jersey and Pennsylvania markets. The property offers traditional gaming positions such as slot machines, poker tables, retail sports betting, iGaming, and live Thoroughbred racing, according to the firm.

High barriers to entry

But what does it take to succeed in this industry?

David Sambur, Apollo Global Management

“The same thing that would allow you to be successful in any private equity investment,” said David Sambur, Apollo’s partner and co-head of private equity. “You have to pay the right price, enter at the right time, have the right value creation plan and to execute on it. You must have a good management team and you have to exit in the right manner.”

What’s also an advantage, paradoxically, is the high barrier to entry. “The complexity and heavily regulated nature of the gaming industry is, in part, what attracts us to it,” Sambur said. “While this may turn other sponsors away, we’ve historically leaned into this complexity.”

Different jurisdictions in the US have different approaches to how they regulate the gaming industry.

The first deal was the hardest, Sambur said, because the firm had to do a lot of work to get comfortable with the sector and even design structures that allowed private equity firms to invest in casinos in America.

But after almost 15 years of investing in this space, having a deep-seated knowledge of the industry puts Apollo at an advantage. “We’ve steadily built up our knowledge base and understanding around regulatory processes and licensing requirements, and we have been licensed, approved or otherwise found suitable in numerous jurisdictions in the US and abroad,” he said.

The investing model is opportunistic and fundamentals-driven. The firm doesn’t go for the obvious. “We often go where others aren’t – often where we see opportunities that are not fully priced in,” Sambur said.

For example, the firm bought the Venetian and Great Canadian during covid, when there was significant uncertainty around future demand.

Clairvest’s thesis in gaming is developed around investing in local markets, something that exposes it to less competition. But at a local level, navigating the regulatory landscape starts with bringing the authorities on board, said Michael Wagman, the firm’s president and managing director.

“We are not investing in destination gaming, but in local market gaming where there are a limited number of competitors,” Wagman said. And as partners with local authorities, Wagman said “our job is to make sure that we conduct and manage our properties to the highest standards for their benefit.”

That also means contending with paying high taxes, something that is a high barrier to other would-be investors. In these regional gaming markets, taxes can be as high as 50 percent. “In local markets, we are paying a higher tax rate to the state government compared to destination gaming casinos, and in exchange, we get a contractual monopoly or oligopoly in that jurisdiction,” said Wagman.

As a result of this strategy, Wagman said: “We have never been turned down on the regulatory side and we will go through hoops to make sure that the regulators understand that we are their partner and that they are essentially our boss, and we essentially work for the local government.”

Covid & online gaming

Sambur recalls receiving a call during dinner from the CEO of Italian gambling company Lottomatica, which was one of Apollo’s gaming investments when Milan went into a lockdown. This was the first of the many investments that would be affected by covid, and required the ability to adapt quickly.

As people hunkered down at home, they led to the proliferation of online gaming. “When we were in the heart of the lockdowns,” explained Wagman, “it was unclear how the world was going to react to being in person again, and so a lot of governments embraced the online side as a way to continue to collect tax revenues.”

For Lottomatica, EBITDA has grown more than threefold through M&A and sustained organic growth. Apollo took the company public in April 2023 at a €2.3bn market cap (the transaction represents a partial exit with the IPO as Apollo is still majority shareholder with approximately 70% of the company).

But the online trend hasn’t been so attractive for PE investors focusing on the US markets. Apollo said it’s not yet active on that front because the sector hasn’t been profitable.

Clairvest also indicated that it is taking a measured approach with this sector. “We have shied away from the B2C space because that is what we call an arms race, which means whoever has the biggest balance sheet and willing to spend the most money will win. We do not love the underlying economics of most B2C opportunities around the world,” Wagman said.

Michael Wagman, Clairvest

Policing online gaming is another issue that has kept Clairvest away. “Online gaming is much more controversial because you have to protect the way minors bet online. It is much harder to do in that environment than it is when you can check their ID and see them in person at a land-based casino,” Wagman said.

But outside the US, Clairvest has been targeting online gaming even before the pandemic. In 2019, Clairvest made a majority investment of £23 million ($38 million) in FSB Technology (UK), a London-based sports betting and gaming platform. In 2017, the firm invested $73.7 million in Head InfoTech India Pvt, a Hyderabad-based operator of Ace2Three, an online skill-based gaming platform.

Strong consumer demand generated record-breaking commercial gaming revenue of $60 billion in 2022, a 14 percent increase from the previous year, American Gaming Association noted in a report.


Clairvest and Apollo see this sector as lucrative, even with economic uncertainty looming.

“We have exited almost half of our gaming investments and on our realized investments, we have generated a 5.7x multiple of capital and a 47 percent IRR,” said Wagman.

As concerns about the state of the economy continue, Apollo is unfazed.

“This is a great time to be private because public markets are always thinking in forward multiples and may be pricing in a recession that so far has not occurred,” Sambur said. “Las Vegas, for example, continues to have record months and the Venetian continues to achieve new levels of profitability. These businesses are performing very well.”