Due Diligence

As casino gaming matures as an industry and new markets become more scarce, many of today's casino opportunities lie in the acquisition or refinancing of existing gaming operations. When setting out on either of these ventures, a responsible investor will need to consider four important elements:

• Physical condition of the subject property
• Financial condition
• Future potential
• Strength of the management team

Gaming Market Advisors has the operational experience to provide an independent evaluation of the casino property. GMA takes into account the following factors, among others:

Slots - Since the primary product of any casino is its slot product, it is imperative to know the age of the slot machines and how many may need to be replaced.

• If a gaming device is not Ticket In/Ticket Out ("TITO"), is it SAS compliant and capable of supporting an upgrade?
• How fresh are the game titles?
• Does the slot floor have marketing appeal?
• What is the brand and age of the casino management system? Can it support modern marketing techniques such as non-negotiable slot credits and electronic funds transfer?
• Does the casino management system communicate with the hotel, food and beverage and property accounting systems?

Physical Structure - GMA examines both the physical attributes of the property and also holds discussions with managers and employees, gaining their valuable insights into the different aspects of the property.

• What is the physical condition of the property?
• Is the hotel in need of a renovation?
• Is the kitchen equipment adequate or is it in need of replacement?
• What capital improvements are on the Director of Engineering's wish list?

When evaluating a riverboat/barge casino, certain non-gaming components need to be considered such as the age and condition of the vessel itself.

• Does the vessel suffer from operational inefficiencies that impact earnings?

These issues, along with numerous others, are crucial components of the due diligence process.

STAFF - The due diligence process also examines the human aspect of the operation. GMA interviews the existing management team, reviews the casino's marketing programs, and conducts a detailed analysis of the historical financial records.

GMA's conclusions often find obscure or hidden facts:

• If existing management is lacking and the marketing department has missed many opportunities, the upside may be more significant than originally thought.
• An evaluation of the financial records may show that there exists long-term slot participation and lease agreements that the new owner will be forced to assume.
• Also certain expenses, previously paid by the selling company's corporate parent, such as Human Resources, Accounting, and IT functions, will now become a property expense.

By conducting a detailed analysis of these items, the due diligence process will result in a clear picture of the state of the existing development and its true potential.

Members of GMA have had hands-on experience not only working on various due diligence processes prior to acquisition, but also in examining properties in the post acquisition phase.

Most important, every member of the GMA Team has worked in line positions in casinos, from bus boy to General Manager. This experience gives GMA unique insights into the due diligence process, and makes the Consulting Team privy to certain aspects of a casino refinancing or acquisition that others who lack extensive experience in the gaming industry may have overlooked.