Drake Star Partners: Game deals surpassed $60B in first half of 2021

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Game deals surpassed an unparalleled $60 billion in the first half of 2021, according to investment bank Drake Star Partners.

Spurred by pandemic lockdowns and investors seeking havens, gaming has benefited immensely during a time when many other industries have been wrecked. And halfway through the year, the amount of money going into game acquisitions, investments, and public offerings is nearly double the amount for all of last year.

More than 635 deals announced and closed in the first half with a total value of $60 billion, said Michael Metzger, a partner at Drake Star Partners, in an interview with GamesBeat.

“The market continues to stay very strong. What’s also interesting is that minority financing further ticked up from the dollar value in Q2 compared to Q1,” Metzger said. “That’s going to determine the kind of the future gaming companies that we have. The more money that flows into the industry on the private side further builds momentum for the companies that will exit in the future.”


Above: Game M&A is hitting record levels in 2021.

Image Credit: Drake Star Partners

The industry saw 169 mergers and acquisitions (M&A) deals were announced or closed during the first half of 2021 with a mammoth $23 billion in deal value.

Record consolidation happened across mobile, PC, and consoles driven by major strategic companies such as Tencent, Electronic Arts, Epic Games, Take-Two Interactive, Byte Dance, Embracer, and Stillfront. Private equity firms Bain, Blackstone, and Carlyle were also active.

“The whole consolidation play is validated,” he said. “Sea Garena’s stock did very well, and it was followed by Embracer and Stillfront. They have all been executing pretty well with the rollout strategy. They did better than most of the others. EA jumped into the M&A game late, but are now very aggressive. Take-Two as well. And they all realize, also late, that stock performance is not only based on performance of their own games, but also showing growth and accelerating growth.”

During the first half, Electronic Arts acquired Glu Mobile for $2.4 billion and Playdemic (creator of Golf Clash) from Warner Media for $1.4 billion. The latter deal was possible since Playdemic didn’t really fit as AT&T decided to spin out the story-driven game business of Warner Bros. Games to Discovery in a $43 billion deal.

Tencent bought a majority stake in Berlin-based Yager, maker of Spec-Ops: The Line. Take-Two acquired Nordeus for $378 million (and, just missing the deadline, it also bought facial animation tech firm Dynamixyz for an undisclosed price). Azerion bought social casino game developer Whow Games.

While the biggest game companies are buying in all regions, the media companies in Hollywood are in divestment mode and are less focused on games than trends such as streaming movies.

Private investments

Above: Billions of dollars are flowing into private financings for game companies.

Image Credit: Drake Star Partners

Private gaming companies have raised $4.8 billion through 364 minority financings from VCs and strategic investors such as big corporations.

The first half had 19 high-value ($50 million-plus) private financings, and that means investment from both strategic and financial investors is at an all-time high. Investment activity seems to be further accelerating with capital invested in the second quarter of 2021 exceeding the first quarter of 2021.

For investments, Istanbul’s Dream Games raised $155 million at a $1 billion valuation to take Royal Match globally. VR Chat raised $80 million. Mythical Games raised $75 million to build a nonfungible token (NFT) game engine. Educational games platform Lingokids raised $40 million for expansion. And Pokerface maker Comunix raises $30 million for social mobile games.

And a couple of weeks ago, Activision Blizzard disclosed that it had invested $100 million in Playstudios, which is preparing to go public in a SPAC.

Public markets

Above: Sea Garena was one of the biggest successes in the public markets.

Image Credit: Drake Star Partners

The public markets are on “hyperactive mode” with 37 announced andclosed IPOs with a staggering $11.2 billion in proceeds and three large
multibillion valuation special purpose acquisition company (SPAC) deals in first six months of 2021.

During the quarter, PUBG maker Krafton said it would go public at a $25 billion valuation, but since it is raising $5 billion in capital in that transaction, the smaller amount is counted in the $11.2 billion in proceeds number, Metzger said.

With $16.4 billion in secondary and debt offerings in the first half of 2021, public strategics continue to raise more capital to fuel additional inorganic growth.

Public markets had several high-profile IPO’s, direct listings and SPAC deals: Applovin, Playtika, Roblox, Huuuge, Nexters, Playstudios,  JamCity, TinyBuild, Nazara, Cherry Group, and Krafton.

Embracer Group raised $700 million in debt to accelerate its own growth. Cherry Group raised $500 million in an IPO in Germany. PlayStudios started trading and raised a $75 million line of credit for future growth.

“I think the Krafton IPO is going to be massive,” Metzger said. “They will probably be much more acquisitive in the future.”

A slowdown coming?

Above: The big game buyers and investors of 2021.

Image Credit: Drake Star Partners

As for the chance of a post-pandemic slowdown, Metzger said, “I don’t expect any, you know, major correction or anything like that. Some stocks seem to be valued very frothy versus others seem to be a little bit undervalued. But, you know, often there are good reasons for that.”

Metzger watched to see what happened with Apple’s focus on user privacy over targeted ads. Some feared the change in the Identifier for Advertisers (IDFA) would trigger an apocalypse for free-to-play mobile games, which depend on finding high-value users through advertising. Fears about IDFA changes triggered a lot of acquisitions between adtech and game companies.

“It certainly affected the revenue the mobile game companies generate, and it made things more difficult,” Metzger said. “Several of the companies are trying to make marketing work effectively again, but it’s probably still going to take time. But it wasn’t like the big reckoning that some people expected for a long time. I think people managed fairly well.”

Another sign of health is that we saw a lot of deals related to the PC and console segments, whereas the deals used to be mostly concentrated in mobile, said Metzger.

“There used to be very few console and PC deals, but now it’s spread across different segments,” he said.

Drake Star itself closed four deals. The company is planning on releasing quarterly reports, as it already tracks more than 1,000 gaming companies.


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