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Booming M&A Gaming Market

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M&A in Gaming has hit record levels in 2013 and 2014 H1. For the first time, Corum Group has put together research M&A trending within the Gaming Ecosystem.
I gave this talk at Casual Connect SF July 2014 detailing increased appetite of Asian buyers and driving trends of innovation and interest activity across the gaming industry.

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Booming M&A Gaming Market

  1. 1. San Francisco 2014 Alina Soltys Senior Analyst
  2. 2. 2 Corum – Sell Side Advisory Firm  Establishedin 1985.  Focusedon transactions in technologyproductsand services businesses.  Professional staff drawn from senior positions at technologycompanies.  300+ M&A transactions. Over$7 billionin transactionvalue.  25+ year relationshipswith global software companies.  Most extensive databasein the industry (approx. $25millioninvested).  Integratedglobal operations; transactions in 21 countries.  Educational Leader,creatorof the world’s most attended techM&A conference,sponsor of the World FinancialSymposiums,frequentguest on CNBC, MSNBC and other industry events.
  3. 3. 3 Overview Technology M&A Update Gaming M&A Update Gaming Market Driving Trends @CorumGroup
  4. 4. 4 Overview Technology M&A Update Gaming M&A Update Gaming Market Driving Trends @CorumGroup
  5. 5. 5 Technology Index: Quarterly Subsectors: Vertical, IT Services, Internet, Infrastructure, Horizontal, and Consumer
  6. 6. 6 41 39 33 20 18 17 17 16 15 14 14 14 14 14 Top Strategic Acquirers: 2013 - YTD
  7. 7. 7 41 39 33 20 18 17 17 16 15 14 14 14 14 14 Top Strategic Acquirers: 2013 - YTD
  8. 8. 8 Top Strategic Acquirers: 2013 - YTD* *
  9. 9. 9 Representative M&A Transactions Acquirer: Facebook Target: Oculus Rift Deal Value: $2 Billion Date: April 2014 Sold to Following the Acquisition Target: Carbon Design Group Acquirer: Oculus VR Transaction Value: Undisclosed Sold to Target: Jenkins Software (RakNet) Acquirer: Oculus VR Transaction Value: Undisclosed Sold to
  10. 10. 10 Overview Technology M&A Update Gaming M&A Update Gaming Market Driving Trends @CorumGroup
  11. 11. 11 0 10 20 30 40 50 60 70 80 90 100 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2009 H1 2009 H2 2010 H1 2010 H2 2011 H1 2011 H2 2012 H1 2012 H2 2013 H1 2013 H2 2014 H1 Reported Gaming Transactions Transaction Value ($B) Billion Dollar + Total Deals Transactions in the Gaming Ecosystem Sources includecompany filingsand releases,industry databasesand CorumGroup. • Both majority andminority dealsincluded. • Transactionsrelatingto thegamingecosystemwereincluded,notlimited to gamingstudios. • Only announced or availabledeal valuesincluded.
  12. 12. 12 Source:Corum 0 10 20 30 40 50 60 70 80 90 100 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2009 H1 2009 H2 2010 H1 2010 H2 2011 H1 2011 H2 2012 H1 2012 H2 2013 H1 2013 H2 2014 H1 ReportedGamingTransactions Transaction Value ($B) Billion Dollar + Total Deals Transactions in the Gaming Ecosystem Deal Volume Highest in 2 years Record 2013 & H1 2014 Excluded Billion $ Transactions: • H2 2013: $3.05B • H1 2014: $2.27B $0 $20 $40 $60 $80 $100 $120 inMillions AverageDealSizeTrending Average Deal Size: 5 Year Growth : 98.9%$42m to $84m YoY: 57% $53.5m to $84m
  13. 13. 13 Asian DominanceIncreased, Focused Regionally Source: Corum $1.53B for 51% $330M for 40% $1.4B for 6% Global Transactions Top 7 of 10 Deals Top 9 of 10 Deals (2013)(2012) ChangYou will invest $600M in mobile game developers South Korean GameVil sets $150M+ for M&A / investment. Acquires Com2uS & Nine Wheels plusother partners. $200m – Acquisition$200m – Marketing$200m -- Rev Share
  14. 14. 14 Top Asian Gaming Acquirers 10 10 4 4 3 3 2 2 1 1 1 50%+ Growth 50%+ Growth 235% Growth
  15. 15. 15 Overview Technology M&A Update Gaming M&A Update Gaming Market Driving Trends @CorumGroup
  16. 16. 16 BRICS Growing Up BRIC outpacing Downloads and Revenues by 2.7x compared to US & Asian Markets Brazil and Russia are growing rapidly!
  17. 17. 17 BRICS Growing Up - Brazil and Russia Source: PwC Russia $460M in 2011 $1.5B in 2014E Latin America $1.4B in 2013 $1.8B in 2016E
  18. 18. 18 BRICS Growing Up - Brazil and Russia Source: PwC OnlineGaming 2nd largestin Europe Hits Top 5 for iOS and Google Play in 2013 Mobile penetration & long commutes drive further growth Brazil gaming market 5th largest in the world Consoles prohibitively expensive, push users to FTP on Mobile & PC Russia $460M in 2011 $1.5B in 2014E Latin America $1.4B in 2013 $1.8B in 2016E
  19. 19. 19 Overview Technology M&A Update Gaming M&A Update Gaming Market Driving Trends @CorumGroup
  20. 20. 20 Messaging Is Disruptive WeChat Upgrade adds games, emoticons & mobile payment system Line filed to go public in Tokyo Feeling the Pinch, March Year end -10% 3 mo. after releasing Kakao Games, monthly revenue soared 9x to $35M 396 Million + Players Monetizing similarto
  21. 21. 21 Messaging Apps Driving Adoption Rank 2013 Game 1 모두익마줌 for Kakao 2 Million Arthur 3 마구마구2013 forKakao 4 Wind Runner for Kakao 5 DevilMaker for Kakao 6 Puzzle& Dragon 7 카드뫼 샨 샵략지 8 Everytown for Kakao 9 Clash of Clans 10 Hello Hero for Kakao Korea Top iOS Games Rank 2013 Game Publisher 1 Puzzle& Dragons GungHo Online 2 LINEBubble! LINE 3 Pokopang LINE 4 LINEPOP LINE 5 LINEWINDrunner LINE 6 LINEHIDDEN CATCH LINE 7 LINEJELLY LINE 8 PrincessPuntSweets GungHo Online 9 LINEPLAY LINE 10 TempleRun 2 Imangi Japan iOS & Google Play Downloads + + = 950M+ Users
  22. 22. 22 Candy Crush Saga uniting with WeChat Key Markets Exposed to Candy Crush through WeChat Top 20 in US Top 80 in China
  23. 23. 23 M&A Making Huge Impact in OTT Acquirer: Facebook Target: WhatsApp Deal Value: $19 Billion Latest User Counts: 465M Sold to Acquirer: Alibaba Target: Tango Deal Value: $215M Received funding Acquirer: Rakuten Target: Viber Deal Value: $900M Latest User Counts: 100M Sold to Dedicated Gaming Fund $25M
  24. 24. 24 Social and Real Money Casino Companies 21% 11% 9% 7%6% 5% Restof Market** 41% SocialCasino GameMarket Share - 2Q14 SOCIAL ONLY MOBILE ONLY $2.7BSocial Casino Gaming Market 46% 20% on Mobile & Growing of Top 100Publishers have at least one social casino game Source: App Annie, Eilers Research
  25. 25. 25 Billion Dollar Consolidation Spree Acquirer: Amaya Gaming Target: Rational Group Ltd. Deal Value: $4.9B Deal Multiple:3.5x* Revenue Date: June 2014 Sold to Acquirer: AristocratTechnologies Target: VideoGaming Technologies Deal Value: $1.3B Deal Multiple:5.5x Revenue Date: July2014 Sold to Acquirer: GTECH Target: IGT Deal Value: $6.4B (cash plus debt) Deal Multiple:3.0x Revenue Date: July2014 Sold to
  26. 26. 26 Games as a Service Source: Wandoujia. April –November 2013 Top $100M+ Games 90% FTP Continuously deliveringnew value to Gamers • Players pay as they go & what they use - “FTP”Service Concept • Startingwith trailer thru game play, online presence, community, etc.All Encompassing • Stronganalytical solutions and strategies • Keep the users coming back Monetization is Key
  27. 27. 27 Consoles adopting FTP Model $30M+ in Microtransactions “Console-tainment” Source: SuperData $2B $2.5BRevenue Growth(YoY) $295M $352M in 2012 in 2013 Worldwide Console Spend Microtransactions
  28. 28. 28 Security Concerns Heightening Especially relevant to outfits with payment systems 97% of all mobile malware* *Predominatelyin Middle East & Asia Global Transactions RoMaster Mobile Is Here: Record amounts of internet traffic
  29. 29. 29 Attractive Traits of Companies Industry Traits of Attractive Companies Highest performers grow 100%+ annually while generating 20-50% EBITDA margins Spread across multiple platforms – developed in unison with the intent from beginning Continuous, low-cost development pushes to game – maintain player interest Analytics – key to improve and build upon performance; often in-house systems KeyThemesDrivingGamingM&A F2P Developer Services Regional M&A Past Growth Stage Geographic Strength
  30. 30. Thank You www.corumgroup.com Alina Soltys For copy of the presentation: alina@corumgroup.com

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