Last year was very eventful for the gaming industry in general. Despite the hit of a worldwide pandemic, the gaming industry somehow did well and survived the crisis. It may have something to do with people playing more video games in lockdown and binging OTT platforms. The major game publishers were quick to take advantage of a potential market situation. They came out big to acquire other gaming companies and add to their market capitalization. According to reports, the gaming industry has raised its valuation to $33.6 billion in 2020. There were more than 664 transactions involved in raising the market capitalization of gaming companies.
Among various nations, United States dominated the gaming acquisitions and transaction market in 2020. The US companies participated in major deals throughout the calendar. Around 36 percent of the total deal value came from the United States. China was second in ranking in terms of investments in gaming sectors. They contributed 27 percent of the total deal value. The number of total investments in the gaming sector was more than the last year. Many believe that this was due to the increased screen time of many games during the lockdown period. Although COVID 19 may have affected other industries and business sectors, it has certainly boosted gaming and investments related to the gaming industry.
Who Were The Most Active Acquirers?
There were more than 211 gaming deals in the first three quarters of last year alone. In addition to gaming deals, there were other acquisitions and investments in platform, technology, and game making. All of these resulted in $15.35 billion in revenue generation for the gaming companies. Among these, several IPOs generated around $9.2 billion. In the first three quarters itself, around $6.6 billion was raised via acquisitions. There were around 219 major merger and acquisition deals that occurred in 2020. The gaming industry raised $12.6 billion through these acquisitions.
The major acquirer of last year was Tencent, Embracer group, Stillfront, and Zynga. Among these Tencent participated in 23 M&A deals, while Embracer group completed 26 deals of which 18 were acquisitions. Together these acquirers contributed to 60 percent of the total deal value.
The Top 10 Gaming Acquisitions Of 2020:
As a result of increased game time and lockdown, the gaming industry buzzed with revenue and collections. Last year, many companies invested heavily in the gaming sector to reap the fruits of labor soon. It is predicted that the gaming market will continue to grow in upcoming years. The immediate result of this growth is portrayed in the multiple IPO and acquisitions through the major portion of 2020. Among all these gaming acquisitions, the top deals were:
1) The Most Expensive Acquisition
Microsoft was at the forefront of gaming acquisition last year leading to the acquisition of ZeniMax media. This acquisition deal was by far the most expensive gaming acquisition of last year. ZeniMax is the parent company that owns multiple game publishers and gaming studios like Bethesda Game Studios, Id Software, MachineGames, and others. The net valuation of the acquisition was calculated around $7.5 billion. Microsoft announced the acquisition on September 21. According to multiple sources, the deal is currently ongoing and yet to reach a final settlement. But in any case, this acquisition was indeed a landmark event in the history of gaming acquisitions. This move by Mircosoft is reported to be the second-highest gaming acquisition of all time after Tencent. Back in 2019, Tencent acquired Supercell for $8.6 billion.
2) Zynga’s Big Deal
The second most eventful acquisition in the gaming calendar of 2020 was displayed by Zynga. Zynga acquired Peak Games of Turkey for a record amount of $1.8 billion. This is the highest expenditure in Zynga’s 13-year history. Peak games are based in Turkey and specialize in card games. Zynga CEO Frank Gibeau mentioned that they were thinking about the acquisition as early as 2017. The acquisition happened with the finance of $900 million in cash and $900 million in the stocks of the company. Before this Zynga had acquired around 80 percent of Small Giant Games for $560 million in 2018. Zynga is hopeful to go big in the gaming market with the new acquisition. They were mainly interested in the deal because of the success of Peak Games’ Toon Blast and Toy Blast. Both these games have more than 12 million daily active users.
3) Tencent added one more
The Chinese Supergiant Tencent continues to add more feathers to its already vast list of acquisitions. Tencent acquired Leyou Technologies for a whopping $1.4 billion. Leyou Technologies is famous for the Warfram game. Tencent’s acquisition of Leyou technologies marked a significant spread of market control by Tencent. Previously Tencent had major stakes in big gaming companies like Epic Games, Riot Games, Ubisoft, Bluehole, Supercell, and Activision Blizzard. In 2016 Tencent’s acquisition of Supercell is still the highest valued acquisition in the gaming industry. The equity value of this acquisition deal is around $1.322 billion. Tencent is supposed to pay out the consideration to Leyou Technologies entirely in cash. This also signifies that Leyou will entirely come under the ownership of Tencent.
4) Embracer Group Acquisition Spree
Embracer studios had a great last year in terms of gaming acquisitions. The Sweden-based group went on an acquiring spree and ended up finalizing around 26 deals. Out of these Embracer Group led 18 acquisition deals which helped them dominate the Acquisition race last year. The most notable acquisition out of all was Saber Interactive for $525 million. Other than this, Embracer group also acquired a lot of other companies in 2020. In August 2020, Embracer group acquired DECA and 4A Games for $100 million and $80 million respectively. The very next month, Embracer group acquired Vertigo Games for $136 million. Previously before this Embracer Group already owned notable Gaming publishers like THQ Nordic and Koch Media. In the deal with Saber Interactive, Embracer Group offered $150 million upfront and agreed to pay the rest of $375 million over the next three years based on performance.
5) Stillfront Group’s Market Consolidation
Another important acquisition was led by Stillfront Group. They acquired Strom8 for $400 million in January last year. Stillfront Group has agreed to pay $75 million through Stillfront shares. Strom8 studios are best known for their casual mobile games like Dragon Story. The company was struggling as it had to cut off more than half its employees. Thanks to this deal, the company can look to survive the crisis. The Sweden-based global game studios wanted to explore different audiences in the market. Stillfront shared their thought process behind the acquisition of Storm8 as they wanted to target more female audiences through their games. The Swedish Company also acquired Candywriter for $195 million and Nanobit for $148 million.
6) Applovin Acquires Machine Zone
Applovin acquired Machine Zone for a massive value of $500 million. The deal took place last year in May. This move is motivated by the intention of doubling down on mobile games. Machine Zone is the well-known publisher of Game of War: Fire Age, and Mobile Strike. Applovin has commented on the deal with a positive mentality to bring in new technologies in Mobile gaming and launch more addictive and versatile games. Machine Zone has raised significant revenue through its variety of Strategy based mobile games. Applovin certainly looks to upgrade the mobile gaming experience for its customers by acquiring Machine Games. The details of the acquisition deal are not yet publicly revealed. Somehow it is estimated that Applovin will be moving their headquarters to Palo Alto to the Machine Games Office.
7) MacArthur Fortune spends plenty
In April 2020, the most notable gaming acquisition was led by MacArthur Fortune. It went on to acquire Jagex for $530 million. Jagex is one of the biggest and long-standing game developers in the UK. Founded back in 2000, Jagex has managed to turn in $1 billion alone through its flagship game RuneScape. MacArthur Fortune will be paying out the funds through Platinum Fortune LP. The main motive behind the acquisition is the mutual interest of both companies’ vision of gaming and new technologies. MacArthur has promised to deliver the latest R&D facilities to facilitate a better gaming experience for the customers. The US-based global Asset management firm has stated that the Jagex team of Cambridge will remain intact.
8) Scopely Acquires FoxNext Games
At the beginning of last year Scopely Acquired FoxNext Games for a valuation of $250 million. Scopely is famous for its mobile games titles like Star Trek: Fleet Command. They acquired FoxNext Games from Disney after Disney acquired Fox back in 2019. Scopely acquisition of FoxNext Games was largely backed by $200 million funding which they want to use for development purposes. FoxNext Games is famous for making Marvel Strike Force. The Los Angeles-based game studio has 200 employees which Scopely looks to add to their team of developers. Scopely looks to bolster its mobile gaming market with this acquisition.
9) Garena by SEA ltd takes over Phoenix Labs
SEA’s Garena acquired Phoenix Labs for $150 million. Phoenix Labs is famous for its Co-op game Dauntless which has millions of player bases around the globe. The acquisition is very strategic from Garena’s point of view as it will give them access to all of Phoenix Labs’ development teams and studios throughout Canada. Phoenix Labs also looks to gain from this deal as they will be accessing Garena’s extensive research data and technologies to create and engage the mobile gaming community in South East Asia. Garena is already famous for the title of FreeFire which is a free-to-play Battle Royale Shooter game for mobile. In 2019 FreeFire was one of the most downloaded games on mobile.
10) Kakao Games’ Strategic move
Kakao Games is a Korean media and Entertainment giant that spent most of the first quarter of last year strategizing and calculating their every move. Finally in February Kakao Games finalized the Acquisition of XL Games for $100 million. Kakao Games is known for its strategic expansions and acquisitions. With the help of this acquisition, Kakao Games now holds a 53 percent controlling stake in XL Games. XL Games is famous for the titles of ArcheAge and Moonlight Sculptor. The partnership of Kakao Games and XL Games is not new, as both of them had previously worked together on several projects. Finally, with the acquisition, Kakao Games will be looking to expand its mobile gaming studio and gaming IPs. Kakao Games’ major success is the Black Desert Online which has a significant presence in the western market.
There were several other big and small acquisitions throughout the four quarters of last year. While some companies looked to strengthen their team of developers, some focused on the revenue and market capitalization part. Tencent and Embracer Group led the acquisition market by numbers. EA Sports also was in talks with Codemasters by the end of 2020 to acquire the firm for $1.2 billion. The most notable acquisition of this year also came from EA Sports. EA Sports acquired Playdemic (famous for Golf Clash) for $1.4 billion. The deal took place on June 23, 2021. More acquisitions will follow this year thanks to the ever-increasing market of gaming despite the global pandemic.