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Game industries bargains surpassed an unparalleled $71 billion in the 1st nine months of 2021, according to a report by investment bank Drake Star Partners.
With pandemic lockdowns shifting persons from other activities into games and investors looking for havens, gaming has blossomed in the course of a time when lots of other industries have been wrecked. And nine months into the year, the quantity of cash going into game acquisitions, investments, and public offerings is nevertheless increasing at a record price.
More than 844 bargains had been announced and closed in the 1st half with a total announced worth of $71 billion, stated Michael Metzger, a companion at Drake Star Partners, in an interview with GamesBeat. (We’ll be speaking a lot about game bargains at our GamesBeat Summit Next occasion on November 9-10).
“2021 is turning out to be a landmark year,” Metzger stated. “We mainly focus on M&A and financings for private companies and Q3 has been an amazing quarter for both. We also expect that the M&A and private placement market for gaming companies to stay red-hot in the coming quarter.”
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Special objective acquisition providers (SPACs) had been extremely preferred earlier this year as a way to go public rapidly by way of a reverse merger with a shell organization. They are losing some steam as nicely, as the regulatory atmosphere for SPACs is altering and providers are also more cautious, Metzger stated. As an instance, JamCity had to cancel its announced SPAC deal and go an additional route for funding.
With 3 months to go, the dollar volume for bargains announced or closed is currently more than twice the dollar volume for complete year 2020.
The 1st nine months
The September update analyzes the 1st nine months of the year in terms of deal activity and volume across market place segments — M&A, private placements, initial public offerings, and specific objective acquisition providers (SPACs, which are more quickly to full than IPOs), and other public financings. It classifies M&A activity by volume and multiples, public market place efficiency and valuations, and discusses the most active gaming purchasers and VCs.
The acquisitions have driven unprecedented consolidation across mobile, Computer, and console sectors driven by significant strategic providers (Embracer Group, Tencent, Epic, Stillfront, Take-Two, Zynga, EA, Sony, ByteDance, Facebook, Netmarble, Unity) as nicely as private equity firms (Carlyle, Bain, and Diversis).
A total of 228 M&A bargains had been announced or closed in the course of the 1st nine months of 2021 with a staggering $31.9 billion in deal worth, Metzger stated.
On top rated of that, a record $9 billion was raised by private providers in 493 bargains from VCs and strategic investors. With two of the biggest raises in gaming, the hot blockchain/NFT gaming segment attracted $1.8 billion in private financings.
And 2021 is also been a huge year of higher-profile IPOs, direct listings and SPACs: Roblox, Krafton, Unity, AppLovin, Playtika, Huuuge, Playstudios, Nexters, TinyBuild, Nazara, and Cherry Group have all gone public by way of these several sorts of transactions.
While the stock market place has cooled off more lately, the third quarter saw additional acceleration of private financings.
A total of $4 billion was raised more than 117 bargains with substantial enhance in typical verify size (JamCity, Voodoo, and Tilting Point). The NFT/blockchain gaming providers raised more than $1 billion at some amazing valuations. Sorare, a fantasy soccer game organization with just 30 staff, raised $680 million from SoftBank at a $4.3 billion valuation, thanks to Sorare’s $150 million in revenues this year.
“The whole NFT market is red hot,” Metzger stated.
And Dapper Labs raised a $250 million at a $7.6 billion on the strength of its $780 million in sales and resales for its NFT-based NBA Top Shot moments, and its bargains with the NBA and the WNBA.
“We had a great, phenomenal quarter,” he stated. “What was super exciting to me was the investments and private companies further grew significantly beyond the high since we’ve been tracking over the last two years. And at the same time, 13 out of the 15 largest financings were above $100 million, which is also phenomenal.”
It implies that venture capital investors are confident that these providers will get acquired for substantially more cash.
“The more money that flows into the private ecosystem, that’s super exciting for the future,” Metzger stated. “The ton of M&A activity continued to be very strong, much larger from a dollar value than last quarter.”
Metzger noted how active Andreessen Horowitz, deemed one of the top rated venture capital firms, has been in the space with a total of 32 investments in games this year. And the firm led 13 of these bargains.
M&A in Q3
M&A activity continued to be robust in the third quarter. It amounted to $9 billion in transaction worth by way of 61 Netmarble’s acquire of SpinX, Bytedance’s acquisition of Pico, Tencent’s acquire of Sumo, Playtika’s acquisition of Reworks, Zynga’s acquire of Starlark, MTG’s acquire of Playsimple, and Unity’s acquire of Parsec. Netflix made its 1st game acquisition with its acquire of Night School Studio, maker of the Oxenfree game.
It may possibly get tougher to beat Q4 numbers, as last year Microsoft completed its $7.5 billion acquisition of ZeniMax, owner of Bethesda.
IPO and SPAC bargains slow in Q3
Krafton completed its IPO raising record $3.7 billion, Nexters completed its SPAC, and Doubledown went public on Nasdaq by way of an IPO. Overall, public gaming providers faced headwinds and Q3 had restricted new announced IPO and SPACs. The Krafton IPO was announced in the earlier quarter and was completed this quarter.
“The slow-down in IPOs probably has to do with a smaller pool of at-scale (or IPO stage) private gaming companies as well as a decline of the stock price of listed tech and gaming companies,” Metzger stated. “We have seen a massive wave of IPOs this year, and most at-scale gaming companies that wanted to go public likely have done it by now. Independent of the gaming sector, the overall global IPO market also saw a decline of 25% from Q2 to Q3. We are aware of several larger gaming companies that are targeting to go public in the coming months, but only smaller IPOs were announced in Q3 (while Krafton and Nexters executed on the IPO / SPAC).”
Metzger is not sure how Q4 will turn out just however.
“The headwinds in the public market are that we saw a lot of stocks decline,” he stated. “And that’s reflected in the overall market, but also among other tech companies decline. A good amount of the gaming companies declined in value. And that might have been the reason why there have been no significant announcements of new IPOs that were announced this quarter.”