Oct 26, 2023 - Technology

Report: Game industry investment, deals to increase in 2024

Illustration of a pixelated coin sticking out of a pixelated wallet.

Illustration: Megan Robinson/Axios

Mergers and acquisitions in the games industry are picking up after "an extended quiet period," according to a new third-quarter report from Drake Star Partners.

Why it matters: Consolidation will make gaming's giants even bigger.

Details: Drake Star tracked 33 M&A deals worth around $5 billion between July and September.

  • By the sheer number of deals, that was a two-year low. But the deal value exceeded three of the last five quarters, when all the deals tallied in each period totaled less than $1 billion.
  • M&A deals for 2023's third quarter included mobile gaming firm Playtika's purchase of Youda Games and Innplay Labs for around $450 million as well as the successful $1.7 billion offer led by Goldman Sachs to take educational gaming platform Kahoot private.
  • Drake Star also counted nearly $1 billion in private investment for the quarter, up from the spring. Investments were primarily in PC, console or blockchain companies.

What they're saying: "Based on our discussions with many of the top gaming companies in the last weeks, we expect the deal volume to increase steadily over the next year," Drake Star partner Michael Metzger tells Axios.

  • Metzger anticipates Tencent, Sony, Take-Two and Savvy/Scopely will be the most active buyers in 2024, while the Embracer Group is expected to divest more studios.
  • Public companies, including Nintendo, EA and Nexon, are sitting on $45 billion in cash and cash equivalents, setting up the potential for more M&A, according to venture capital firm Konvoy Ventures.

Yes, but: It's been a year of panic for industry pros, who have despaired over job cuts and lessening investment.

What's next: Metzger sees some hope for developers and firms seeking investments, thanks to an increase in venture capital funds focused on gaming.

  • "While it is true that it is harder for founders to raise an early stage round and even harder to raise a growth/late stage round compared to 2021, it is also true that we have never had more gaming-focused VC funds than now," he says.
  • He pointed to Bitkraft, A16Z's gaming fund, Play Ventures, Griffin Gaming, Vgames and Makers Fund as examples, and said "several of them are in the process of raising follow-up funds."
  • "Valuations have come down, but that also makes it more attractive for VCs to invest now in the future unicorns."

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