Welcome back to our Expert Insights blog series with Caglar Eger, the CEO of exmox. In this monthly series, Caglar leverages his 10 years of experience to share his thoughts and knowledge on the gaming and ad tech industries.
In today’s post, Caglar discusses the current state of gaming M&As, exploring the transition from venture capital investments to private equity interests in gaming. Ronen Gross, VP of Business Development at Plarium, and Shum Singh, founder of Agnitio Capital, also share their insights and predictions on M&A in gaming. Read below to learn about the shift from mobile to PC gaming, driven by increased competition and higher UA costs, and if gaming companies should be strategizing for both platforms.
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Have you observed any notable mergers and acquisitions in the gaming space recently?
Well to start, the recent big news of Playtika acquiring SuperPlay for close to $2 billion. It’s a huge acquisition and I’m looking forward to seeing how it plays out. I have been following Superplay since the early days and think it is super impressive how they scaled both Dice Dreams and Domino Dreams, and I’m excited to see their growth under the Playtika umbrella.
I’ve also noticed Tripledot Studio’s acquisition of Zephyr Mobile and all the investments Tencent has been making. Tripledot Studio’s has always stood out to me because of its M&A strategy. Their $116 million raised in early 2022 gathered attention because it was reported that their raises were being used for mergers and acquisitions instead of “core business activities”. As for Tencent, their investment into Lighthouse Games last year and Techland demonstrated their commitment to investing in games.
In your opinion, what types of investments are slowing, and what types are rising?
I think that VC investments are slowing while private equity investments are on the rise.
Most private equities are new to gaming and don’t have the expertise that gaming studios have, which is why I think they’ve been slow to catch on to gaming investment opportunities. I still don’t know if they have enough knowledge on the gaming space, but they are at least looking into it more in depth than they used to because, let’s face it, the mobile gaming industry is booming.
In the mobile gaming industry, early-stage investments have historically been dominated by venture capitalists (VCs), who are willing to take big risks on new game developers or platforms with the potential for massive growth. VCs are betting on the next hit game or app to deliver exponential returns, often seeking 10x or 100x payoffs. However, as mobile gaming companies mature, generating steady revenues through in-app purchases, ads, or subscriptions, they become more attractive to private equity (PE) firms. PE investors look for these established, stable companies where they can step in, optimize operations, and create steady, predictable returns.
Shum Singh, Founder and Managing Director of Agnitio Capital, added that mobile gaming is now a maturing landscape after many years of growth and investment. It makes up a massive part of the games industry, comprising almost 50% of the entire market, so it will still attract plenty of PE interest.
This transition from high-risk, high-reward VC-backed growth to the more stable, operational focus of PE is where the gaming industry can benefit from better connections between the two. As mobile gaming companies move from startup to profitability, financial advisors play a crucial role in linking them with the right investors at the right time. By bridging the gap between VCs and PEs, advisors help gaming companies scale from the development of their first hit title to becoming long-term, stable businesses, ensuring they continue to grow and thrive in a competitive market.
Ronen Gross, VP of Business Development at Plarium, also noted that the top-grossing charts will have fewer new entries and the low single-digit industry growth is coming mostly from the big brands, not from new companies. However, he said that investments are still possible for privately owned, growing companies. These types of companies, he said, “have many suitors, and you can probably offset the low multiples with good negotiations.”
What type of shift do you anticipate when it comes to gaming platforms?
The gaming industry has been gradually shifting from mobile platforms to PC, and it’s becoming more noticeable now. One big reason is that a lot of the top mobile platforms and developers have already been bought up by larger companies, so there’s not much left on the market for new players or investors. With the major deals done, mobile isn’t as exciting or full of fresh opportunities like it used to be.
Another reason for the shift is the high cost and intense competition in mobile gaming, especially when it comes to marketing and user acquisition (UA). If you’re developing a mobile game, it’s not enough to just make a good game – you need a ton of venture capital to compete with the big names who dominate the marketing space. Plus, mobile games require constant updates and content to keep players engaged, which means higher ongoing costs for both development and marketing. On the other hand, PC gaming is more cost-effective and predictable. Platforms like Steam give you good visibility, and you can gain traction through Twitch, YouTube, and influencers without needing a huge marketing budget. Once you launch a PC game and sell it, you’re pretty much done, which makes it a more appealing option for developers and investors looking for a less competitive and more stable environment than mobile.
Shum Singh and I also discussed this shift, and he additionally noted that paid marketing is not necessary to gain traction for indie PC titles. However, he said, “there is very little VC interest in PC games due to the longer development cycles and lack of metrics available to determine whether a game will be successful. So the only way to fund PC games is really through publishers, which I find strange given the hit rate is higher than mobile games currently.” He also added that seeing the number of wishlists accumulated prior to EA launch is a useful metric to determine if a PC game can be successful.
For a gaming company right now, is it better to do both mobile and PC games?
It’s hard to say since it really depends on the company and what their expertise is—some companies specialize more in mobile games, while others are pros when it comes to PC. But honestly, in today’s gaming world, it makes a lot of sense to try and find a publisher who can help bridge the gap. Whether you’re looking to bring your mobile game over to PC or take a PC game to mobile, having someone with experience in both areas can be a huge help. With so many players on both platforms these days, it’s a smart move to expand your game’s reach. It’s all about finding the right partner who understands the nuances of each platform and can help you make that transition smoothly.
What types of market consolidation have you observed in recent years that demonstrate the shift within the mobile gaming industry?
Some of the biggest names in gaming acquisitions that come to mind are Stillfront Group and Embracer Group, both of which went on major buying sprees, acquiring between 50 to 80 gaming companies in recent years. You also have other big deals like Zynga’s numerous acquisitions before being bought by Take-Two, and Scopely’s rise through acquiring studios and then being acquired themselves by Savvy Games Group for a staggering $4.9 billion. Miniclip has made its mark by acquiring a few companies, while Rovio (known for Angry Birds) made headlines when they bought Turkish studio Ruby Games.
However, the wave of consolidation has noticeably slowed down, especially after the hype around hyper-casual games began to fade. Just a few years ago, it felt like there was a new acquisition or merger every week. But now? Not so much. We don’t see as many new games being released, and the market has become much more consolidated. Five or six years ago, many gaming studios were still independent and had more room to experiment and grow on their own. But over the last two or three years, we saw a period where the majority of mid-sized and smaller studios were absorbed by larger players. Now that most of the big deals have already been made, the pace of mergers and acquisitions has slowed down significantly across the industry.
What do you think is the path from here on out for gaming M&A’s in this post-Covid stable growth period?
Ronen Gross discussed his thoughts with me about this question. He said, “Today in the post-Covid days and the geo-political and economic challenges, we see a market that has stagnated and shows much slower growth than before.”
I completely agree – we’re currently in a transitional phase in the gaming industry, moving from the explosive growth seen during the COVID-19 pandemic to a more natural decline as people return to their regular routines. This shift has had a noticeable impact on M&A’s, which have slowed down considerably. During the pandemic, the entire gaming industry grew significantly, with more people staying home and spending time on their devices, which led to a big spike in revenue.
At the same time, interest rates were extremely low, and in some parts of Europe, even negative. Venture capitalists took advantage of this by pouring money into various sectors, including gaming, leading to a flood of capital in the market. Companies that were up for sale were getting incredible offers, driven by the heightened interest in gaming during this period.
However, as the market began to stabilize post-COVID, things started shifting in the opposite direction. Ronen noticed this shift as well, saying, “Following the M&A spree during Covid, not many private small or midsize companies were left. Superplay was definitely one of them, but how many ‘Superplay’s’ do you know? M&A has become more challenging, less common, and we’re seeing much lower multiples.”
Interest rates have also risen, and the urgency to diversify investments or deploy capital into high-growth sectors like gaming has waned. Additionally, the low-pressure environment means there’s less incentive to invest heavily or push for big acquisitions. We’ve now entered a phase where both investors and companies are more cautious, with less pressure to spend or make deals – resulting in a noticeable slowdown in market activity.
Is there any advice you can share for companies interested in gaming M&A or consolidation?
Right now, launching a new game and attracting users can be pretty tough. If you’re on the hunt for a potential buyer, your best bet is to look for one that really aligns with your company’s goals. It’s not just about marketing support; you want a buyer who can help with things like game economics, monetization strategies, and daily operations. Having that kind of backing can seriously boost your game’s growth and visibility. The right partner can make all the difference, helping you navigate challenges and seize opportunities to stand out in a crowded market. So, focus on finding someone who brings more to the table than just a check – look for a true collaborator!
I also discussed advice for gaming companies with Ronen, and he gave some great insights on M&A. He said, “There are 2 major questions you need to ask yourself: when is the right time to sell? And to whom?” He really emphasized that the timing of an M&A is absolutely risk management. You’re trying to determine if you can continue to grow the company yourself and potentially receive a higher valuation in the future, or if a powerhouse with budget and knowledge can help you grow faster. He also agreed that the right partner makes all the difference, saying, “You need to look at the cultural fit, level of integration or independence you’ll have, and see if it fits into your strategy.
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