Gaming Companies Target Studios, Mobile Games As Acquisitions Hit 5-Year High – Crunchbase News

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Acquisitions by companies in the gaming space hit a high in 2021, surpassing the full-year totals of each of the past five years, Crunchbase data shows.
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The pickup of M&A activity comes as gaming companies experienced record usage over the past year or so. With the COVID-19 pandemic, consumers of all ages spent extra time at home and more hours playing games.
From a broader market perspective, there’s been an advancement of high-value digital assets that exist virtually, such as cryptocurrency and nonfungible tokens, according to Jed Strong, CEO of gaming-focused payments platform Tiv, and a former employee of Xbox
“For all of these developments and advancements, whether it’s Web 3-related developments, tied to crypto, NFTs, or otherwise, the reality is that it creates a lot of opportunities around the ecosystem itself,” Strong said. 
There will be a need for new standards, devices and systems, Strong added, meaning there’s potential to create value up and down the stack. Gaming companies, he said, are realizing how much they can benefit from vertical integration and are looking to bring technologies to improve user experience into the fold, such as communications tools.
Companies in the gaming space—both VC-backed and otherwise—have acquired 220 companies globally so far this year, up from 165 last year and 142 in 2019, according to Crunchbase data. 
When looking specifically at venture-backed startups, 48 gaming companies have been acquired so far in 2021, up from 42 last year and in 2019, but not yet at the five-year high of 59 in 2016, per Crunchbase data.
Those acquisitions include:
The uptick in acquisitions in the gaming space comes as M&A is generally up across the board, according to Michael Torosian, a corporate attorney focused on M&A at the law firm Baker Botts LLP. 
“The revenue and these business models, in my mind, are so robust that the gaming investors and the gaming company acquirers are all over this,” Torosian said. “And the more general investors and the group companies or the larger corporates are looking at this space much more seriously and putting a lot more dollars into investments and acquisitions. The numbers will speak for themselves. These companies are obtaining and keeping users and they’re generating revenue.”
Indeed, gaming companies that have gone public over the past year, including Roblox, reported in their S-1 statements how the pandemic has led to an increase in usership. 
Gaming has generally been seen as a massive market with a large audience to tap into, Strong said. But now, “there’s a better understanding of the gaming consumer and just how valuable they are over their lifetime.”
The gaming consumer “indexes young, but is older than you would expect,” said Strong, with the average age of the U.S. gamer being 33 years old. They’re also educated and more likely to engage in a STEM-related career, which often leads to more disposable income.
“There’s starting to be that consolidation of platforms acquiring publishers and studios, and I think the other point I’ll make is that there is so much capital being invested in different gaming companies, and that includes game developers,” Strong said. “But I think what we’re going to see in the next five years is a level of competition among game titles that we haven’t seen before.”
Some examples of that consolidation include Epic Games’ acquisition of gaming development and publishing company Tonic Games Group in March 2021 and Sony Interactive Entertainment’s acquisitions of game development studios FireSprite and Housemarque earlier this year.
Of the 25 VC-backed gaming startups that have been acquired by other gaming companies so far this year, at least five describe themselves as publishers or studios, including China-based game developer and publisher Moonton and Massachusetts-based game studio HitPoint Studios, according to Crunchbase data. That number is higher when counting non-VC-backed companies that have been acquired by other gaming companies.
Another area for acquisition targets is mobile gaming, primarily because phones and the internet have gotten so much faster, according to Michael Pachter, the managing director of equities research at Wedbush Securities.
“The pace of technology is changing so fast that they have to keep up,” Pachter said.
Illustration: Dom Guzman
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