Thursday, 16 June 2011

Global Video Games Investment Review 2011 – June Transaction Update

Games investment bank Digi-Capital ( has just released a quarterly transaction update of its Global Video Games Investment Review 2011 Commenting on the update, Digi-Capital boss Tim Merel said, “As anticipated, games investment and M&A dealflow has accelerated again. We’re seeing some interesting trends emerging so far this year:
  1. MMO M&A is increasing in scale, with Summit Partners/TA Associates/Bigpoint ($350M), Changyou/Shenzen 7Road Technology ($100M including earn out) and Perfect World/Cryptic ($50M) continuing the trend kicked off earlier in the year by Tencent/Riot (est. $350-400M);
  2. Social games investments are increasing in both volume and scale, such as Kabam ($115M in two rounds since January), Wooga ($24M), Crowdstar ($23M) and Funzio ($20M);
  3. There has been a significant increase in social-mobile games M&A, such as Gree’s acquisition of OpenFeint ($104M), and investment, including Papaya Mobile ($18M) and TinyCo ($18M). In non-social mobile games, Rovio impressed the market with its $42M investment;
  4. Chinese, Japanese and South Korean games companies are increasingly seen by Western firms as leading industry consolidators, so critical when companies are selling themselves;
  5. The gambling/social games overlap is bringing companies from either side into each others’ markets, such as Caesars/Harrah’s/Playtika ($45M) and Zynga/DNA Games/Market Zero; and
  6. Console sector consolidation has been increasingly focused on repurposing quality console developers to online/mobile games markets.
Our global dealflow leads us to expect these trends to continue through H2 2011, and we remain very bullish on online and mobile games growth and investment - now is a fantastic time. We are seeing significant appetite from Chinese, Japanese and South Korean games companies to acquire and invest in strong Western online and mobile games companies, but as our Chinese operating partner often reminds us building the right relationships remains critical. Market innovation continues across the piece (particularly in social-mobile games), with US, European and Asian companies developing great businesses built on great games. We’re also privy to a groundswell of games IPO activity poised to come to market in the next 12-18 months. As people have come to expect, we remain long term bears on the pure console market, despite recent and anticipated hardware launches.”
Tim will be discussing the social-mobile games market and investment at both GamesBeat/MobileBeat (together with Norwest Venture Partners) in San Francisco and Casual Connect (together with Playfish, TinyCo and W3i) in Seattle in July.