Mergers and acquisitions: How to Get Deals Done
F
or anyone wondering whether the blistering pace of mergers and acquisitions in the video games industry might slacken as we bid
farewell to the Covid-19 pandemic, the first few weeks of 2022 have provided a robust riposte. First, Take-Two’s $12.7 billion takeover of Zynga,
and then Microsoft’s $68.7 billion deal to acquire Activision Blizzard, the largest deal in the history of the industry. These mega deals come off the back of two
How not to do a deal
years of unprecedented deal-making activity in the sector. The Covid-19 pandemic and associated lockdown measures saw millions confined to their homes, spurring a massive increase in engagement with interactive entertainment and strapping rocket boosters to existing industry trends, such as the rise of subscription and in-game monetisation business models. 2020 saw $33.6 billion invested in the sector, and this was easily eclipsed by the huge $85 billion spent in 2021. Industry behemoths with burgeoning balance sheets, such as Microsoft, Take-Two, Sony and
Electronic Arts have been deploying this capital and independent developers have benefitted from escalating multiples. More money has been brought to the table by the increasing number of private equity firms and other investors interested in the sector, including Tencent and Carlyle.
“Whatever the specific rationale for a deal, acquirers are, for the most part, focused on the basics: the product and the people”
If the last few weeks are anything to go by, 2022
is set to be another record breaker. We thought it would be instructive to take
a quick breather and draw out some recurring themes for founders of video games businesses that we’ve seen in the deals we’ve been involved in. Whatever the specific rationale for a deal,
acquirers are, for the most part, focused on the basics: the product and the people. They have to see value in the games or other products of the business and, increasingly, the extent to which further value can be unlocked, whether through in- game monetisation or otherwise. This can be one wildly successful game, a well-known franchise, a proven ability to develop new titles which drive user acquisition and retention, or even just a neat
56 | MCV/DEVELOP February 2022
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