From humble beginnings, the video game industry is now a multi-billion dollar sector. The best producers release new consoles and blockbuster titles on a regular basis and the consumers just can’t get enough of the latest games.
While the industry has developed, we’ve also seen a rise in professional video gaming. The world of eSports has made heroes out of recreational players with the best exponents earning life changing sums in exchange for winning the biggest tournaments.
This dramatic rise has also seen a steady increase in the number of mergers and acquisitions between game providers. Becoming a stronger force in the sector is a clear goal when there is so much at stake and one way in which to do this is to partner up with a member of the opposition.
Top of the Tree
The biggest merger in the video game industry came back in 2016 when Tencent became involved with the Finnish producer Supercell. The deal was valued at $10.2 billion when Tencent acquired 81.4% of the company’s shares.
Supercell had been steadily gaining a solid reputation within the sector with some strong-selling titles such as Hay Day, Clash Royale and Clash of Clans. They’d enjoyed steady growth and, alongside their head office in Helsinki, the organisation also had a presence in San Francisco, Tokyo, Shanghai and Seoul.
In short, they were prime candidates for a merger and Supercell were a good fit. The companies have now been together as one entity for five years and the list of best-selling titles continues to increase.
Playing with the Big Boys
As one of the biggest players in the gaming industry, Microsoft can be expected to keep an eye out for strong talent within the sector. In September 2020, they made one of the most lucrative financial moves as they acquired video game holding company ZeniMax for $7.5 billion.
They may not have been a big rival, but Microsoft certainly claimed a ton of benefits when the deal was completed. ZeniMax was the parent company of a wide number of games producers including id Software and Bethesda Softworks.
The ongoing rivalry between Microsoft and PlayStation is at the heart of this one and it’s easy to see why the bigger company was so keen to part with the cash. It’s simply a case of expanding your quality and list of titles and this was one way in which Microsoft could look to gain an advantage over their biggest competitor.
A Crushing Victory
Away from the world of professional eSports and the kind of strategy games that are enjoyed by professionals, the Swedish producer King have released some of the best loved recreational titles. Among their roster are huge releases including Candy Crush Saga and three popular sequels including Candy Crush Friends Saga.
As a relatively small producer releasing such huge titles, King were ripe for an acquisition and that came to fruition in 2016 when Activation Blizzard came calling. With a deal worth around $5.9 billion, this is the third biggest transaction within the video game industry and it’s proved to be a shrewd investment.
At the time, many industry professionals felt that Activation Blizzard had paid too much as they funded the deal, partly with cash and partly through an existing credit agreement. The doubters have since been proved wrong with King producing record revenue figures.
Mergers on the Cards
The gambling sector possesses many similarities to the gaming industry and this is another area where mergers and acquisitions have been prevalent in recent years. The reasons for this mirror those that we have already seen.
Here is a highly competitive sector worth billions of dollars each year and new firms come onto the market on a regular basis to claim a share of the vast revenue. When two companies become one, the overall strength is increased and the ability to generate more income rises.
This trend was evident back in 2015 when two giants of the industry, Paddy Power and Betfair, completed a merger worth some £5 Billion. The two companies have created one of the world’s largest online gambling businesses, but they continue to trade as two separate entities.
As Paddy Power and Betfair provide a great set of betting markets, games and competitive bonus offers within their online casinos, customers can still use both sportsbook and casino platforms, making the pair stronger as a unit.
While the gambling industry may represent a different sector, the reasons why companies merge remains the same. In some cases, it’s fair to say that there is a chance to cancel out the opposition, but we’d like to think that the majority of mergers and acquisitions are carried out for more positive reasons.
Together, two strong games producers are even better: They can share the best of their talent with a view of producing even better titles and engaging the playing public to a higher degree.
In all cases, gaming companies simply want to be competitive and that’s a trend that we can see in other sectors. We’ve already seen some big money deals go through and it’s perhaps surprising that no-one has eclipsed the $10.2 billion deal between Tencent and SuperCell back in 2016.
Perhaps we’ll see a bigger transaction in the near future, but we can be certain that more mergers and acquisitions will appear in the months and years ahead.