Booming M&A Gaming Market

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San Francisco 2014 Alina Soltys Senior Analyst

description

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.

Transcript of Booming M&A Gaming Market

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San Francisco 2014Alina SoltysSenior Analyst

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Corum – Sell Side Advisory Firm Established in 1985.

Focused on transactions in technology products and services businesses.

Professional staff drawn from senior positions at technology companies.

300+ M&A transactions. Over $7 billion in transaction value.

25+ year relationships with global software companies.

Most extensive database in the industry (approx. $25 million invested).

Integrated global operations; transactions in 21 countries.

Educational Leader, creator of the world’s most attended tech M&A conference, sponsor of the World Financial Symposiums, frequent guest on CNBC, MSNBC and other industry events.

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Overview

Technology M&A Update

Gaming M&A Update

Gaming Market

Driving Trends

@CorumGroup

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Overview

Technology M&A Update

Gaming M&A Update

Gaming Market

Driving Trends

@CorumGroup

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Technology Index: Quarterly

Subsectors: Vertical, IT Services, Internet, Infrastructure, Horizontal, and Consumer

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14 14 14 14 14

Top Strategic Acquirers: 2013 - YTD

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Top Strategic Acquirers: 2013 - YTD

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Top Strategic Acquirers: 2013 - YTD*

*

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Representative M&A Transactions

Acquirer: FacebookTarget: Oculus RiftDeal Value: $2 BillionDate: April 2014

Sold to

Following the Acquisition

Target: Carbon Design Group

Acquirer: Oculus VRTransaction Value: Undisclosed

Sold to

Target: Jenkins Software (RakNet)

Acquirer: Oculus VRTransaction Value: Undisclosed

Sold to

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Overview

Technology M&A Update

Gaming M&A Update

Gaming Market

Driving Trends

@CorumGroup

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Reported Gaming TransactionsTransaction Value ($B) Billion Dollar + Total Deals

Transactions in the Gaming Ecosystem

Sources include company filings and releases, industry databases and Corum Group.• Both majority and minority deals included.• Transactions relating to the gaming ecosystem were included, not limited to gaming studios.• Only announced or available deal values included.

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Source: Corum

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Reported Gaming TransactionsTransaction 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

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Average Deal Size Trending

Average Deal Size:

5 Year Growth : 98.9% $42m to $84m

YoY: 57% $53.5m to $84m

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Asian Dominance Increased, 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 plus other partners.

$200m –Acquisition$200m –

Marketing$200m -- Rev Share

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Top Asian Gaming Acquirers

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50%+ Growth

50%+ Growth

235% Growth

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Overview

Technology M&A Update

Gaming M&A Update

Gaming Market

Driving Trends

@CorumGroup

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BRICS Growing Up

BRIC outpacing Downloads and Revenues by 2.7x compared to US & Asian Markets

Brazil and Russia are growing rapidly!

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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

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BRICS Growing Up - Brazil and Russia

Source: PwC

Online Gaming 2nd largest in

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

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Overview

Technology M&A Update

Gaming M&A Update

Gaming Market

Driving Trends

@CorumGroup

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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 similar to

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Messaging Apps Driving Adoption

Rank 2013

Game

1 모두익마줌 for Kakao

2 Million Arthur

3 마구마구2013 for Kakao

4 Wind Runner for Kakao

5 Devil Maker for Kakao

6 Puzzle & Dragon

7 카드뫼샨샵략지

8 Everytown for Kakao

9 Clash of Clans

10 Hello Hero for Kakao

KoreaTop iOS Games

Rank 2013

Game Publisher

1 Puzzle & Dragons GungHo Online

2 LINE Bubble! LINE

3 Pokopang LINE

4 LINE POP LINE

5 LINE WIND runner LINE

6 LINE HIDDEN CATCH LINE

7 LINE JELLY LINE

8 Princess Punt Sweets GungHo Online

9 LINE PLAY LINE

10 Temple Run 2 Imangi

JapaniOS & Google Play Downloads

+ + =950M+ Users

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Candy Crush Saga uniting with WeChat

Key Markets Exposed to Candy Crush through WeChat

Top 20 in US

Top 80 in China

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M&A Making Huge Impact in OTTAcquirer: FacebookTarget: WhatsAppDeal Value: $19 BillionLatest User Counts: 465M

Sold to

Acquirer: AlibabaTarget: TangoDeal Value: $215M

Received funding

Acquirer: RakutenTarget: ViberDeal Value: $900MLatest User Counts: 100M

Sold to

Dedicated Gaming Fund$25M

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Social and Real Money Casino Companies

21%

11%

9%

7%6%5%

Rest ofMarket**

41%

Social Casino Game Market Share - 2Q14

SOCIAL ONLY

MOBILE ONLY

$2.7B Social Casino

Gaming Market

46%

20%

on Mobile & Growing

of Top 100 Publishers have at least one social

casino game

Source: App Annie, Eilers Research

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Billion Dollar Consolidation Spree

Acquirer: Amaya Gaming Target: Rational Group Ltd. Deal Value: $4.9BDeal Multiple: 3.5x* RevenueDate: June 2014

Sold to

Acquirer: Aristocrat Technologies Target: Video Gaming Technologies Deal Value: $1.3BDeal Multiple:5.5x RevenueDate: July 2014

Sold to

Acquirer: GTECHTarget: IGTDeal Value: $6.4B (cash plus debt)Deal Multiple: 3.0x RevenueDate: July 2014

Sold to

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Games as a Service

Source: Wandoujia. April –November 2013

Top $100M+ Games

90%FTP

Continuously delivering new value to Gamers

• Players pay as they go & what they use - “FTP”Service Concept

• Starting with trailer thru game play, online presence, community, etc.All Encompassing

• Strong analytical solutions and strategies

• Keep the users coming backMonetization is Key

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Consoles adopting FTP Model

$30M+in

Microtransactions

“Console-tainment”

Source: SuperData

$2B $2.5B Revenue Growth (YoY)

$295M $352M in 2012 in 2013

Worldwide Console Spend

Microtransactions

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Security Concerns Heightening

Especially relevant to outfits with payment systems

97%of all mobile

malware*

*Predominately in Middle East & Asia

Global Transactions

RoMaster

Mobile Is Here: Record amounts of internet traffic

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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

Key Themes Driving Gaming M&A

F2PDeveloper

ServicesRegional

M&A

Past Growth Stage

Geographic Strength

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Thank Youwww.corumgroup.com

Alina SoltysFor copy of the presentation:[email protected]