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Blockchain gaming, crypto and nonfungible token (NFT) companies raised $1.9 billion in the first nine months of 2021, according to merger and acquisition advisory firm Quantum Tech Partners.
Alina Soltis, co-founder of Quantum Tech Partners, said the stats were part of a record nine months of gaming financial activity in the nine months ending September 30. But it doesn’t include last Friday’s announcement that blockchain gaming platform Forte raised $725 million – a big number for Q4.
It said the third quarter alone saw record M&A transactions for takeover game firms of $15.58 billion, bringing the total for the first nine months of 2021 to $34.36 billion — nearly double the number from 2020.
Gaming startups also raised $8.58 billion in the third quarter, bringing the total to $25.52 billion. About 41 of the transactions were over $100 million. The total value has already exceeded the total raised in 2020.
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The Embracer Group and its subsidiaries have announced 16 deals on their own, and we can expect more deals at a solid pace, with the 18 largest public gaming companies holding more than $100 billion in cash. The Embracer Group CEO Lars Wingefors said yesterday
The company plans to acquire 37 companies next year.
Soltys said a trifecta of high valuations, record merger and acquisition activity, and unprecedented fundraising for the public games company led to a record nine months. She also indicated that metaverse plays will likely get more attention thanks to Facebook changing its name to Meta.
General game companies are trading at 4.5 times revenue and 15.3 times EBITDA (earnings before income, depreciation, and amortization taxes). And they have more than $100 billion in cash. A year ago, the number of M&A deals was up 47.8% from a year ago.
Acquiring companies have access to inexpensive credit, including issues of stock or bonds, debt and direct investments. Enad Global 7 has a credit facility of $267 million, Bilibili has $1.2 billion on hand, MTG has $300 million of credit facility and equity issues, Embracer Group has more than $2 billion in credit and equity issues, Stillfront Group has $1 billion In credit and equity problems, Zynga has more than $1.2 billion in credit and debt.
“The credit, bond and debt offerings add up to a lot of money over time,” Soltis said. “They make all mergers and acquisitions possible. In the Nordic countries especially, banks and family offices are very involved in the games.”
Among the biggest deals, in gaming, NetMarble bought SpinX games for $2.19 billion, and Tencent bought Sumo Group for $1.23 billion. EA has spent $3.5 billion in the past nine months on acquisitions of Glu Mobile and Playdemic, while Bytedance has spent $4.775 billion.
“A lot of these groups are looking for game development talent because there is a huge shortage,” Soltys said. “They are having a hard time hiring internally. They are looking for other studios and other teams who can come in and help work on some of their intellectual property.”
The challenge is that many game developers want to develop their own original games, rather than working on someone else’s ideas. However, companies like Embracer take over studios and allow them to work on whatever they want without interference, Soltys said. This enabled the company to make many deals.
“Studios have complete creative control,” Soltys said. “They’ve got the best of both worlds.”
The money is constantly flowing thanks to new entrants, such as Bytedance and other big investors.
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