Weekly News Digest #46

Miniclip acquired Easybrain from Embracer Group

Switzerland-based mobile gaming company Miniclip has acquired Cyprus-based mobile games developer Easybrain from Sweden-based gaming giant Embracer Group (STO: EMBRAC B) for $1.2B. The deal is expected to close in early 2025.

Financial Details: No More Shares

In Apr’21, Easybrain was acquired by Embracer for $765m, with a $640m upfront payment and a potential $125m earn-out, all paid entirely in Embracer shares. Since then, Embracer’s share price has plummeted to nearly a quarter of its Apr’21 value.

This time, Easybrain is being acquired by Miniclip in an all-cash transaction with no shares involved.

Regarding the financial performance, Embracer Group expects Easybrain to reach Revenue of $287m and adj. EBITDAC of $116m in FY24/25. Considering this and the past year’s performance, the deal represents the following multiples:

Let’s examine why the deal is possible from both the buyer’s and the seller’s perspectives to analyze its feasibility.

Buyer’s Side: Product Fit and Monetization Potential 

Founded in 2016, Easybrain is a 340-person studio creating mobile puzzle games. Today, the studio operates 24 games, the best known being Pixel Art—Color by Number, Art Puzzle—Jigsaw Art Games, Drum Pad Machine—Beat Maker, and Jigsaw Puzzles—Puzzle Games.

Together, the company’s games have generated over 1.7 billion downloads, according to AppMagic.

Source: AppMagic

Apart from casual puzzle titles, the company’s portfolio includes many traditional puzzle games, including Sudoku, Crosswords, and various number puzzles. This diversifies the portfolio and expands the company’s audience. Plus, it makes an exciting fit for the acquirer’s portfolio.

On the one hand, Miniclip has a vast portfolio of traditional sports games, including pool, football, golf, and cricket. This gives both Miniclip and Easybrain a shared experience in scaling and monetizing more “traditional” games, which heavily rely on downloads and ad monetization.

Source: AppMagic

Similar monetization allows the company to double down on ad monetization and optimize UA, which is one of the major reasons for this deal.

On the other hand, puzzle games still have different audiences and nuances when operating them. Acquiring a new company with a proven track record and a diverse portfolio is one of the most effective ways to enter new niches in the current market.

But how did this deal even become possible? It’s all coming back to Embracer.

Seller’s Side: Reinventing Embracer Group and Covering Debt

Sweden-based gaming company Embracer Group has been one of the industry’s most active acquirers since 2020, completing 73 deals with a total value of $8.2B including earn-outs. Let’s have a brief retrospective for better context.

— From 2020 to 2022, Embracer Group was the most active acquirer in the gaming industry. Its aggressive M&A strategy led to the company’s growth to twelve huge operating groups managing hundreds of projects simultaneously.

— In Jun’22, Embracer raised $1B from Saudi Arabia-based Savvy Games Group, a subsidiary of Saudi Arabia Public Investment Fund;

— In 2023, the same investor, Savvy Games Group, was rumored to be about to invest another $2B into Embracer. However, the deal fell through, causing a rapid fall of the Embracer’s stock and marking the start of the company’s crisis;

— In Jun’23, the company announced a restructuring program, intending to cope with an internal crisis by mainly cutting costs and raised ~$183m a month later to support the process;

— In Mar’24, Embracer sold Saber Interactive and Gearbox Entertainment, two of its largest PC & Console gaming companies.

— In Apr’24, the company finished the restructuring, announcing a split into three separate entities: Asmodee Group, Coffee Stain & Friends, and Middle-earth Enterprises & Friends. The split-up is expected to be fully finished by the end of 2024.

Apart from global macroeconomic shifts, Embracer’s decline is primarily caused by its overly complex structure, which brought significant management and operational challenges. As a result, Embracer has been selling off assets recently to simplify and streamline its organization. Some of the recent sales are shown in the picture.

However, lightening the organizational structure is one of many reasons behind the deal. By selling its assets, the company can improve its financials and cover its debts, leading to another reason behind the deal. According to the press release, the sale of the company will allow Embracer to cover its remaining debt almost in full: from $1.2B (SEK 13.2B) to $45m (SEK 0.5B).

Conclusion

The deal is part of Embracer Group’s ongoing effort to reinvent itself by parting with some of its major assets. This approach helps maintain a more manageable organizational structure and allows Embracer to capitalize on synergies from having a more focused strategy.

Most importantly, these deals also enable Embracer to address its financial issues and cover its large debts. In this context, the sale of Easybrain significantly reduces Embracer’s debt, a critical move that cannot be underestimated.

However, this restructuring benefits the group as well as the divested companies. With Miniclip as the new parent company, Easybrain can access more dedicated resources, enhancing its development while doubling down on monetization and user acquisition strategies that align with Miniclip’s expertise and portfolio.

Modern Times Group acquired Plarium

Sweden-based gaming holding Modern Times Group (STO: MTG-B) has acquired Israel-based multiplatform games developer Plarium from Aristocrat Leisure for up to $820m, including:

— $600m upfront and $20m deferred payment until 2026 adjusted for the cash flow expected to be generated between the beginning of Q4 and the transaction’s completion;

— $30m earn-out based on RAID: Shadow Legends revenues for 2025;

— $170m as a second potential earn-out on Plarium’s 2028 revenues, which will not be booked on the balance sheet.

The deal will be funded entirely in cash, including $460m through short-term loans and revolving credit facilities provided by DNB Bank ASA, Sweden Branch, Nordea Bank, and Swedbank AB.

According to the press release, Plarium’s revenue is $613m for the 12-month periodending September 30, 2024, and EBITDA is $137m. The acquisition will double MTG’s EBITDA and free cash flow, with combined annual Revenue of $1.1B (SEK 12B) and adjusted EBITDA of $275m (SEK 3B). Meanwhile, Plarium’s revenue at the end of Sep’24 LTM is higher than MTG’s, and ARPDAU is 3.6 times higher.

Strategic Rationale

This acquisition is part of MTG’s strategy to grow its portfolio with evergreen mobile titles. Additionally, MTG could benefit from integrating Plarium’s proprietary tools—PlariumPlay and GoGame. PlariumPlay provides the company with a monetization opportunity by bypassing app stores, while GoGame is a marketing platform for user acquisition based on its IT platform. MTG plans to integrate Plarium’s technology stack within the group.

The deal follows Aristocrat’s consideration in May 2024 of restructuring and selling its mid-core gaming division, which included Plarium and Big Fish Games. Aristocrat Leisure acquired Plarium in August 2017 for $500m in a full-cash transaction but decided to sell the company because it did not fit its portfolio.

We thank MY.GAMES and Xsolla for supporting this digest.

VENTURE FINANCING

US-based multiplatform game developer Ruckus Games has raised $19m in a Series A funding round led by KRAFTON (KRX: 259960), with participation from BITKRAFT Ventures, Transcend, and Hypergryph. The funds will support the development of the company’s debut title, an undisclosed co-op shooter. Founded by a former Riot Games veteran, Ruckus Games previously raised $5.5m in a Seed funding round in Sep’22.

Finland-based mobile games developer Bit Odd has secured $18.2m in a funding round led by Griffin Gaming Partners, with participation from Makers Fund, Index Ventures, and other investors. The funds will be used for marketing and developing an original mobile title, which is expected to enter early access in 2025. This follows the company’s previous $5.2m Seed round in Jun’22.

US-based mobile games digital store Neon has secured $14m in a funding round from Thrive Capital, Renegade Partners, Griffin Gaming Partners, a16z Games, SciFi VC, and Ribbit Capital. The funds will accelerate the company’s product development and team expansion. The company is developing a Direct-to-Consumer (D2C) game store to help game studios increase revenue and build direct relationships with players by integrating in-game monetization with D2C e-commerce channels.

Hong Kong-based blockchain giant Animoca Brands has secured $10m in a funding round via Simple Agreements for Future Equity (SAFE) from OKX Ventures, CMCC Global, Hong Shan, Republic Crypto, Decima Fund, and Kingsway Capital. The funds will support the development of the company’s web3 platform for the metaverse, Mocaverse. Additionally, Animoca Brands has partnered strategically with the TON Foundation. The company previously secured $32m for the development of Mocaverse in 2023.

US-based mobile games developer Starform has secured $6m in a funding round led by BITKRAFT Ventures, with participation from Dune Ventures. The funds will support the company’s expansion and the continued development of Metalstorm, released in Nov’23 and has attracted 3 million players. Founded by ex-King veterans, the company’s total funding is $20.9m across 4 rounds.

India-based mobile games developer Funstop Games has raised $5m in a Series A funding round led by 360 ONE Asset, with participation from InfoEdge Ventures. The funds will expand the company’s gaming portfolio and enhance its ad-tech capabilities. The company’s portfolio includes 30 titles, such as Pitstop Manager and Airport Rush 3D, which have collectively reached 100 million downloads. Funstop Games secured $1.5m in a Seed funding round in Oct’23.

US-based web3 social gaming platform Basejump has secured undisclosed funding from Community Labs. The funds will support the development of the company’s Action Protocol, a technology that provides users with no-code content generation capabilities. This technology will enhance the platform’s functionality, allowing players to create user-generated content (UGC) and earn from it. The platform is set to debut in early 2025.

PUBLIC OFFERINGS

Singapore-based outsourcing gaming company Winking Studios has secured $10.1m (GBP 7.9m) in a dual-listing Initial Public Offering (IPO) on London’s Alternative Investment Market (AIM) with a market capitalization of $83.7m (GBP 66m). The fundraising was supported mainly by its majority shareholder, Acer Group, which held a 62.6% stake before the IPO and will own 64.6% after. The funds will support M&A activities in Europe and North America. Winking Studios is already listed on the Singapore Exchange.

Canada-based esports company GameSquare Holdings (NASDAQ: GAME) has signed an agreement for $10m in convertible notes from Gigamoon Media. The loan is set to mature in Dec’25 and can be exchanged for 5.7 million shares at $2.5 per share. The funds will support the repayment of a $20m equity facility secured in Jul’24. Gigamoon Media can convert the notes into shares of FaZe Media, which is expected to increase GameSquare’s market valuation from $32m to $44m.

FUNDRAISING

Cyprus-based mobile games developer SayGames plans to distribute $30m in its funding program, focusing on hybrid-casual mobile game developers. In addition to financial support, the company will offer expert guidance, marketing, publishing support, and software tools. This is the company’s second funding initiative, following the $10m distributed across five companies in Feb’21, which was received by the developers of the title My Perfect Hotel, whose revenue has since reached $100m.

EARNINGS REPORTS