As the restaurant and entertainment industries struggle to recovery from the pandemic, Dave & Buster’s Entertainment, Inc. has bet on their rebound by announcing its acquisition of Main Event Entertainment, Inc.. The $835 million all cash deal spells consolidation of the still-fragmented arcade-gaming market, according to Matterhorn’s M&A database. The merger is expected to close later this year.
Dave & Buster’s operates 145 venues blending dining and alcoholic beverages alongside entertainment ranging from arcade games to watching live sports. Main Event focuses on arcade games, laser tag, bowling, and virtual reality gaming alongside restaurants at 50 locations in 17 states. According to the companies’ joint press release, “Main Event targets a different demographic, families with younger children, while Dave & Buster’s has primarily targeted young adults.” Dave & Buster’s is betting on a rebound in gaming activity as people return to indoor entertainment venues. “While each brand will continue to operate independently, ownership of both brands enables us to expand the breadth of customers we serve together, while also enabling each brand to better differentiate its offering to its core consumer.”
Both the restaurant and arcade gaming industries are reeling from COVID-19. During the initial lockdowns of the pandemic, restaurant sales fell off a cliff. An estimated 110,000 restaurants closed their doors business in 2020, eliminating 2.5 million jobs. Others clung to solvency using the federal government’s Paycheck Protection Program, which dispersed an estimated $42 billion to the restaurant and hospitality industry (8% of all funds dispersed).
Restaurants also scrambled to adjust to home delivery even as their dining rooms remained closed – or even emptied- when clients were reluctant to return after the lockdowns eased. Food delivery doubled as patrons used delivery apps and restaurants began offering alcohol to go for the first time. Restaurants also creatively adapted to outside dining, using sidewalks and other public spaces. But just as clients began returning to restaurants in force, restaurants were hit with an additional blow: the great resignation hit the industry harder than almost any other. As of last month, approximately 10% of the accommodation and food services industry’s job openings remain unfilled, higher than any other industry. Employment levels in that industry have yet to recover.
While restaurant revenue has finally met pre-pandemic levels, the figure still represents a drop when inflation is taken into account.
The in-person gaming industry has likewise suffered. Analysts have predicted that the pandemic spells “game over” for the industry. Most standalone arcades have closed over the past decade, and the remaining venues are linked directly to restaurants – such as those offered by Dave & Buster’s and Main Event. Some analysts are predicting growth over the next 3 years to accelerate at a compound annual growth rate of nearly 2%.
Dave & Buster’s and Main Event hope to capture that growth as they consolidate the currently-fragmented market. Dave & Buster’s was advised by law firm Kirkland & Ellis LLP and financial adviser Deutsche Bank. Main Event was advised by firms Weil, Gotshal & Manges LLP and Fried, Frank, Harris, Shriver & Jacobson LLP and financial advisers Goldman Sachs and JPMorgan.