Why Game Acquisitions and Financing Numbers Show Reason for Optimism | The DeanBeat

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The story of the game in 2022 will be known as one that begins with a lot of promise and ends with shattered hopes. However, I believe that gaming is still fundamentally healthy when the world is going strong when it comes to the economy.

The numbers come out this week – including those released today by the M&A consulting firm Quantum technology partner — recorded unprecedented growth in mergers and acquisitions. Quantum technology partner Co-founder Alina Soltys said in an interview with GamesBeat that M&A deals totaled $106.4 billion, up 110% year-over-year.

If you take out the massive pending transaction of Microsoft’s $68.9 billion acquisition of Activision Blizzard, the M&A deals are worth $38 billion, compared with the conventional model from $3 billion. dollars to $5 billion in transactions between 2016 and 2019.

“We have core market activity that has grown tenfold in three years,” Soltys said. “Until 2021, we had never surpassed $25 billion in M&A value, and now we are over $100 billion.”


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Quantum technology partner
Quantum Tech Partners says M&A hits record in 2022.

Quantum Technology Partner numbers match those of Drake Star Partnerappeared this week, while Konvoy joint venture took a narrower view of venture capital funding in games, which fell significantly in Q4.

During the year, venture capitalists and strategic investors poured $17 billion into investments in the game company. That number is down 46 percent from the previous year. However, the number of fundraising transactions has never been higher with 1,039 transactions in 2022.

However, the war in Ukraine has shaken economies around the world that are still recovering from COVID-19 and the crypto crash caused crypto valuations to drop 70% for the year, wiping out assets. of some of the biggest blockchain game enthusiasts. The gloom has led to layoffs at companies ranging from Jam City to Unity, not to mention layoffs at platform owners like Amazon and Microsoft. On the plus side, you won’t see game companies cut as much as tech companies.

Soltys says a total of $76 billion has been raised over the past four years, bringing a lot of capital and building into the game.

Approximately $4.7 billion was invested in Web3, a 43% increase in deal value year over year and 27% of total game funding. That represents huge enthusiasm, as blockchain gaming is only a fraction of the total $184.4 billion in revenue generated in 2022 from games (Newzoo figures). Total blockchain game transactions reached 431, up 224% from a year earlier.

Quantum technology partner
Quantum Tech Partners says valuations vary across mobile, PC and console game companies.

Public company index valuation shows that the public game company’s stock trades at about 2.8 times revenue and 10 times EBITDA (earnings before interest, taxes, depreciation and amortization). November 2021, public game companies are trading at 4.5x revenue and 15.3x EBITDA. Soltys said that decline affects the kind of valuations that private companies can achieve.

Both Web2 and Web3 companies are on the serial purchase list. Embracer Group acquired 12 companies in 2022, down from 27 companies in 2021. Animoca Brands came in second with nine acquisitions.

The top 10 deals include Take-Two’s acquisition of Zynga for $12.7 billion, with a focus on bringing Zynga’s mobile games to a larger portfolio of PC and console games.

Gaming fund raises record amount

Quantum technology partner
Quantum Tech Partners says quarterly financing fell sharply at the end of 2022.

One of the biggest signs of optimism, says Soltys, is that gaming-specific funds — which didn’t really exist a decade ago — have raised a record $3.45 billion by 2022. That doesn’t include a substantial FTX game fund, which went bankrupt with that company’s demise. However, the fundraising environment has never seen so many ready-to-invest dry powders. You can expect big game companies to keep buying VR companies, with Meta buying VR companies, as long as regulators will allow the deals to happen.

However, game companies will have to show they’ve built more products to get that money, or they’ll have to show customers early on key performance metrics or monetization data, based on stage. the part they are in.

“One stage and one popular concept will not suffice,” says Soltys.

As for the 2023 outlook, Soltys said M&A will continue to attract interest in small and medium-sized studios with unique intellectual properties and audiences. Soltys says proven titles give larger buyers the ability to fill in gaps, add to strategic focus areas, or expand with direct feedback.

Innovation continues especially in the area of ​​AI applied to game development.

“We’re going to start to see development at the early concept stage, art, character creation, NPCs, and putting creativity in the hands of non-developers supported by the developer,” Soltys said. AI applications,” said Soltys.

As you can see from some of these charts, the Q4 numbers have dropped quite a bit. Valuations of companies also fell in the second half of the year. Will there be a bunch of blockchain game companies? Soltys isn’t so sure about that, as it’s a low-revenue industry. Rollup happens in mature industries.

Quantum Tech Partners does not expect M&A to set a new record in 2023, although companies will
strive to stay competitive and grow strategically with M&A deals. Buyers with a lot of money will have a chance
to buy companies at a more reasonable valuation not seen in a few years.

E-sports deals have plummeted because steady revenue is hard to come by. FaZe Clan went public through a special purpose acquisition company (SPAC), but its value has plummeted. Capital for e-sports companies is likely to continue to be scarce.

Quantum technology partner
Quantum Tech Partners says gaming deals are on the rise.

“This is a shift away from growth at all costs,” says Soltys. “And more and more travel investors join the market dynamics that are now being taken over by more serious investors who are scrutinizing more.”

Across all startups, fundraising will take longer, checks will be smaller, and overall valuations will be more conservative. But activity will pick up in the second half of the year once the economic picture becomes clear.

“It is important to have a self-sustaining business that makes sense,” says Soltys. “Some startups find themselves in a situation where they need to make some tough decisions. We will continue to see a number of startups scale their burn, trying to find ways to expand their runways and build profitable products and profitable companies. That has changed significantly over the past few months. And that will be the story going forward and early this year.”

In my opinion, blockchain games will have to prove themselves. Both the blockchain and the metaverse have gained a lot of buzz, especially with more skepticism from game developers, as Game Developers Conference Survey Shows This Week. But the metaverse benefits from an optimistic vision shared across multiple industries, from fashion to business, and you’ll see game companies benefit from the metaverse investments other industries are making. After all, a lot of companies outside of games want to build the metaverse, but the most likely builders are game developers.

Blockchain and metadata aren’t the only ways games evolve. VR has had a hugely successful year. Cloud gaming is making it a lot more accessible to non-gamers, and subscriptions from companies like Netflix and Microsoft are making gamers try more things, Soltys said.

I expect that many games that were delayed in 2023—especially titles like Microsoft’s Starfield and Redfall—will finally ship in 2023. This year will be boosted by the launch of PlayStation VR 2 in February, providing a mid-life push for the PlayStation 5. It is hoped that the console shortage will ease in 2023 as the economic downturn loosens the supply chain. And we will see big triple-A game coming such as Dead Space, Diablo IV, The Legend of Zelda: Tears of the Kingdom, Star Wars Jedi: Survivor, Atomic Heart, Hogwarts Legacy, etc.

And Quantum Tech partners hope mobile gaming will see more original titles help build strong communities and generate more excitement. I’m especially pleased to see the hours played increase, as Steve Koenig, head of research at the Consumer Technology Association, has pointed out, as players who have used the game during the pandemic are still playing and playing longer. Soltys says it will be bumpy for some quarters and it will pick up in the second half.

Quantum technology partner
Quantum Tech Partners valuation by quarter.

Add to that the growth of video games in mainstream culture. This is harder to quantify, but you can see it in the successful launch of the TV show The Last of Us, the first episode of which on HBO drew more than 4.7 million viewers. The rebirth of Hollywood and these games will be one of our big themes at GamesBeat Summit 2023 event, May 22 to May 23 in Santa Monica, California.

“The industry has grown tremendously. And there’s more activity, more players, and more important IPs and technologies that have been built to enable all of this,” Soltys said. “In the second half of this year, is there a significant amount of capital that needs to be put into operation. And if you look at the game as a whole, there’s still a lot of innovation going on in Web3 and in the broader gaming environment.”

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