A Small Casino Bets Large

In a $9 billion deal, Eldorado Resorts thinks big as it goes for gaming giant Caesars Entertainment.

On the surface, a company being swallowed by a firm with less than one-quarter of the revenue and one-third the employees would happen about as often as hitting the top jackpot on a slot machine.

But just as slots do occasionally hit, small firms do acquire their much larger peers, which is what’s happening in the gambling industry. Eldorado Resorts, which runs 26 mostly small casinos across a dozen states, agreed this week to buy the far-larger casino firm Caesars Entertainment, a mainstay of the Las Vegas Strip and the fourth-largest gaming company on the planet.

The nearly $9 billion acquisition presents a wrinkle on the challenges leaders can face when effectively integrating two firms—in a year loaded with mega-mergers. In this case, a small company needs to bring in the best attributes and talent of the larger one while not sacrificing too much of the culture and agility that made it successful in the first place. “There’s so much strong talent at Caesars,” says Radhika Papandreou, a Korn Ferry senior client partner and leader of the firm’s Travel, Hospitality, and Leisure practice in North America. “Eldorado has been a regional operator, and the Strip is really different from how you run the properties.”

Debt can be a challenge in these kinds of deals too. Small firms must finance a deal and often issue lots of new debt, or in Eldorado’s case, assume the debt of the company they’re buying. Caesars has about $9 billion of existing debt (Eldorado also has about $3 billion of its own debt). Companies, unless they are bankrupt, are obligated to pay bond investors. Having a lot of debt to service can cut the amount of time leaders can spend on integrating cultures or designing a new organizational structure, says Nathan Blain, a Korn Ferry senior client partner. “It’s an exhilarating clarity of purpose,” he says. Eldorado is trying to cut that debt load immediately by selling off three properties to a third party.

In any merger, experts say the earlier leaders can start working on integration, the better. The Eldorado-Caesars deal is not expected to close until early next year, but if management thinks a deal will go through, experts say the firms can start sharing information, do assessments on employees, begin cultural integration, and other critical work. “All of that can happen before day one,” says Blain.

Those assessments can include the boardroom, as well. Eldorado’s management will lead the combined company, and the board will have 11 members, six of whom will join from Eldorado and five of whom will come from Caesars. Separately, Eldorado has seven directors, while Caesars has 11.

Experts say this deal has other aspects that may make that integration a little easier. Eldorado and Caesars may both run casinos, but for the most part they don’t compete in the same markets. There’s also some personal connections. Caesars CEO Anthony Rodio had been the head of another casino company, Tropicana Resorts, when Eldorado acquired it in 2018. “He’s a known commodity. Eldorado will work with the same executive at a larger scale,” Papandreou says.