often extract key concessions early on, as part of the price of giving this exclusivity. Discussing key points in detail at term sheet stage will also help sellers clarify in their mind what they really want out of the deal – and what comes next.
Microsoft’s interest in Bethesda was clear and obvious. The next Elder Scrolls, when it comes, will be a gold mine
bit of technology, like a development engine. This means acquirers will always be laser-focused on who owns the IP. Talent is just as important. People are the lifeblood
of any successful business. Acquirers will want to see a motivated, well-incentivised team – one that will not walk away after the deal is done. For both buyers and sellers in this market, there are a
number of factors which make deals tick – and which can make them fall apart: • Preparation, as ever, is key: Looking under the bonnet of the business before a sale process starts can identify issues early on and prevent them from delaying – or, worse, derailing – a deal. Unexpected exposures such as litigation or falling short on tax or data protection compliance, ownership of valuable IP and other key assets and terms of employment and other key contracts are usually key areas of focus of an acquirer’s due diligence.
• Clarity on key terms is critical: Time spent flushing out, and talking about, issues in detail at an early stage is time saved later down the line. A good term sheet will cover, in some detail, the most important facets of a deal: any earn-out, restrictive covenants, ongoing incentives for management and expectations on warranties and limitations should be spelt out in as much detail as possible to avoid misunderstandings and bad blood in the negotiation of the long form documentation. It can also be a moment of great leverage for the sellers, as acquirers are very keen to tie in sellers for a period of ‘exclusivity’, during which they will not be able to talk to other potential acquirers. This means that sellers can
• Who is going to look after the shop? This should be decided upfront, before a process gets going. Deals are distracting and can really hoover up management’s time. Ideally one person should steer the transaction and the rest of the team can focus on running the business. We have seen businesses falter in the course of a sale process, miss their targets and the acquirer has sought to either lower the price or walk away. Seeking external investment,
or making the decision to exit a successful business, is a key moment for a founder and for the management team. It is important to approach any investment or sale process with open eyes and an awareness of the pitfalls. Every deal is a leap of faith; but, with careful preparation, and a focus on the underlying drivers, it is possible to narrow the gap.
Edward Lane is a senior associate at Harbottle & Lewis, with a focus on assisting entrepreneurs, businesses, private equity houses and venture capital investors active in the video games sector.
The Call of Duty
We can assume that Take-Two wanted more than a Star Wars games when it pitched for Zynga
franchise is reported to have generated $15bn in revenues over the years. More than Grand Theft Auto. For now
February 2022 MCV/DEVELOP | 57
M&A 2021 Highlights
Given that the year is just getting started and we’ve already had two record-breaking deals announced, 2022 is going to be a bumper year for game industry mergers and acquisitions. This comes off the back of a year that saw $85bn in M&A activity, more than three times that of 2020 according to Drake Star’s latest Global Gaming Report.
Some of 2021’s most prominent mergers and acquisitions included:
• Private equity firm Carlyle acquired Jagex for $530m
• EA acquired Glu Mobile for $2.1bn and Playdemic for $1.4bn
• Embracer Group announced 22 deals in 2021, including the acquisition of Gearbox for $1.3bn, Asmodee for $3.1bn, Aspyr for $450m and Perfect World for $125m
• Take-Two bought Nordeus for $378m
• Among 16 announced deals last year, Tencent acquired Sumo Group for $1.3bn
• Microsoft completed the acquisition of Bethesda for $7.5bn
• Sony acquired Firesprite, Housemarque and Bluepoint
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72
