Digi-Capital’s Games Report Q3 2016 found that games investments, M&As and stock markets have delivered a massive turnaround after last year’s games deals ice age. So far this year, games investments have hit $1.6 billion, mergers & acquisitions $25.7 billion, with Digi-Capital’s global games stock market index up 17 per cent in the last 12 months. After 2015’s worst games deals market in a decade, the rebound so far this year has been unprecedented. If Netmarble’s proposed IPO ends the games IPO drought of the last 2 years, 2016 could be the largest single year for games deals in history.
The games market is firmly in consolidation mode, driven by large scale acquisitions by market leaders. After the go-go years of social games and mobile games, slowing topline industry growth and increasing competition has the largest players adding strength in established markets or pivoting to mobile games as that sector’s dominance continues. The largest M&A deals this year have included the $8.6 billion acquisition of 84.3 per cent of Supercell by Tencent (at a $10.2 billion valuation), King‘s $5.9 billion acquisition by Activision-Blizzard (announced 2015, closed 2016) and the $1.8 billion M&A of Perfect World by its listed film counterpart (after the games company delisted in 2015). Other substantial deals include the CMGE reverse merger in China (after its delisting from NASDAQ) and Vivendi’s acquisition of Gameloft. Another potential large scale acquisition on the horizon is Vivendi/Ubisoft, although that remains unresolved.
Investment growth has also been driven by large scale deals, although the actual number of investments in games continues the long term decline it has suffered since the high point in 2014. Large deals have included Huayi Brothers $288 million investment in eSports company Hero Entertainment, games streaming company Douyu TV’s $226 million, games engine provider Unity’s $181 million and games hardware maker Razer’s $75+ million round.