Weekly News Digest #35
# of announced deals
announced deals’ size
# of closed deals
— Playtika has bought 80% of Reworks for $400m in cash
— Reworks may also receive earn-out consideration in the amount of 6x EBITDA (but not exceeding $200m) if the company reaches the $10.3m EBITDA benchmark in 2022. Thus, the earn-out may range from $61.8m to $200m. If the targets are not met, Playtika will buy the remaining 20% for $1.
The deal structure is rather complicated, and the deal multiples may differ greatly, based on Reworks’ potential financial performance:
Reworks = Design + Gaming
Reworks has only one title in its product portfolio — home design and house decorating game Redecor, one of the top design entertainment apps in the world. According to AppMagic, Redecor has been downloaded more than 24 million times since its launch in Apr’20.
Thus, Playtika expands into the growing Design Gaming category and can potentially accelerate the growth of Redecor, using its live-ops expertise and resources on hand. Moreover, the companies have similar demographics when it comes to their user base. In his interview with Bloomberg Playtika’s CEO Robert Antokol said that the platform of the game has the potential to be used for future fashion, auto, and restaurant-related titles.
Playtika’s finance and strategy
In Jan’21, Playtika raised $1.88B through the IPO on NASDAQ at a price of $27 per share, exceeding its target range of $22-24. Currently, the company’s Market Cap is around $11B, which makes Playtika one of the largest players in the industry. The recent financial results are:
— For Q2’21, Playtika reported Revenue of $659.2m (vs. $650.5m in Q2’20) and EBITDA of $198.7m (vs. -$42.5m inQ2’20);
— The company reported a net income of $90m in Q2’21, compared to a net loss of $139.6m in Q2’20;
— DAU count for Q2’21 dropped by 12% to 10.4 million from 11.8 million in Q2’20, with DPU count dropping from 315k in Q2’20 to 300k in Q2’21;
— ARPDAU increased to $0.70 in Q2’21 vs. $0.61 in Q2’20, while Average MAU stayed on the same 36.1m users as a year before.
Overall, Playtika has a strong inorganic growth strategy, primarily expanding its game portfolio through acquisitions, which has been the key driver of revenue ($1.4B out of $2.3B in 2020) and profitability. So far, Playtika has acquired 8 game studios, including Reworks. Currently, Playtika has around $1.4B available liquidity for further M&A initiatives, so we have all the reasons to wait for more acquisitions.
US-based independent game company ProbablyMonsters, which builds and sustains a family of AAA game studios, has raised a $200m in Series A round led by LKCM Headwater Investments. The round is considered to be the largest Series A raise in game development to date.
ProbablyMonsters has plenty of plans for the proceeds, which will be used for expanding the company’s live operations and community features, financing its three upcoming games, enhancing benefits to employees, expanding its long-term resources, and boosting its business and headcount growth.
The company has been founded by former Bungie president and CEO Harold Ryan with the goal of creating a business that gives its developers full creative freedom. ProbablyMonsters team has collectively worked in more than 70 major companies and has been developing dozens of AAA games. In Oct’19, ProbablyMonsters raised $18.8m in a Seed funding round.
Currently, ProbablyMonsters’s development teams are working on multiple AAA game projects at the same time:
— Firewalk team led by Activision Publishing’s former employee Tony Hsu is working on a yet announced multiplayer AAA game. In Apr’21, the studio entered into an agreement with Sony Interactive Entertainment as its exclusive publishing partner;
— Cauldron team led by ex-Bungie art director Dave Matthews is developing an undisclosed single-player adventure game;
— The yet-unnamed RPG-focused studio is reportedly developing an open-world co-op game.
MERGERS & ACQUISITIONS
Sweden-based Thunderful Group announced the acquisition of Spain-based PC&console games developer Stage Clear Studios for a maximum of $2.97m (EUR 2.5m). The total consideration consists of $1.19m upfront (paid 60% in cash and 40% in newly issued shares), and a potential earn-out of a maximum of $1.78m, payable if certain operational targets are met until June 30, 2025.
US-based mobile games developer and publisher Nifty Games has raised $26m in a Series B round led by Vulcan Capital. Furthermore, the company has also secured $12m in connected debt financing. Part of the funding will be used for further expansion of its mobile sports games pipeline.
Spain-based PC&console game developer The Breach Studios receives an investment of $4.16m (EUR 3.5m) from Russia-based game developer, publisher, and distributor MY.GAMES, via its investment fund MY.GAMES Venture Capital (MGVC).
US-based Cubios, the company behind WowCube gaming device, has raised $1.5m from Xsolla founder for further development of the product. The funding comes as part of a total of Cubios’ latest $4.5m round.
India-based mobile gaming company Studio Sirah has raised $830k in a Seed round led by Lumikai. The proceeds will support the development of mid-core mobile games based on Indian culture and mythological heritage.
Israel-based advertising platform Odeeo has raised $1m in funding to create non-disruptive audio ads for games. The round was led by Play Ventures with the participation of several angel investors. The company will use the funds to accelerate the client onboarding and development of its platform.
Denmark-based mobile gaming subscription service start-up Multiscription has raised $0.95m (EUR 800k) in a Seed funding round led by Sisu Game Ventures. The funding will be used to expand the technical team behind the platform and increase the development force of the company.