? Acquisition
Sweden-based multiplatform games developer and publisher Enad Global 7 (ST: EG7) has entered into an agreement to acquire Russian PC MMORPG games publisher Innova for EUR 109.8m (~$132m). Innova will continue to operate as an independent publisher and a separate entity within the EG7 group
100% upfront consideration paid fully in shares. The consideration does not include any earn-out payments and is paid entirely in newly issued EG7 shares. Given the absence of long-term incentive for the sellers:
75% of shares will be subject to a 24-month lock-up period
25% of shares will be subject to a 6-month lock-up period
Based on Innova’s CY2020 performance — $40m Revenue (EUR 33.3m) and $16m EBITDA (EUR 13.6m), the transaction multiplies are 3.3x EV/Revenue and 8.1x EV/EBITDA
It should be noted that the target’s profitability (40.8% EBITDA margin) was much higher in 2020 compared to the historical average of 24.5%, which is most probably driven by an increased interest in games during the lockdown. There is a risk of declining EBITDA figures in the following years
The transaction is expected to be completed in Q1’21
? Strategic Rationale
EG7 continues to expand its presence across the video game industry value chain by acquiring PC F2P game publishing and distribution expertise (200+ experienced professionals)
EG7 further diversifies its product portfolio by adding publishing licenses for F2P MMORPGs (Lineage 2, Ragnarök Online, and Point Blank)
EG7 improves its position in CIS and European regions with Innova being one of the largest PC game publishers and distributors in the Eastern European region
? Products
Founded in 2006, Innova has published over 20 games and currently operates 9 cash flow-generating PC F2P MMORPG titles with more than 400k monthly active users, including Lineage, Ragnarök Online, Point Blank, Aion, and others
The majority of the games are developed by South Korean gaming companies NCSoft, Zepetto, and Pearl Abyss
? EG7’S Latest Acquisitions
In December 2020, Enad Global 7 entered into an agreement to acquire massively multiplayer online games developer and publisher Daybreak Game Company for up to $300m of cash and newly issued EG7 shares, including:
$260m of an up-front consideration, of which $160m paid in cash and $100m paid in shares
$40m of differed consideration paid in cash, upon the finalization of the Company’s financial statements for 2020 CY
In November 2020, EG7 entered into an agreement to acquire Piranha Games for a total consideration of $73m, including:
$24.2m of an up-front consideration, of which $8.1m paid in shares, and $16.1m paid in cash. 50% of shares will be held back and will be paid over a period of twelve months, subject to achieving specific conditions
up to $48.8m of an earn-out during the period of 2021—2025, with 50% paid in cash in EG7 shares
In August 2020, Enad Global 7 entered into an agreement to acquire Canadian mobile game developer Big Blue Bubble for a total purchase price of up to $58m. The acquisition was completed on November 25, 2020
In December 2019, EG7 acquired Sold Out Sales & Marketing Limited, a London-based video game publisher and distributor of PC/console games, for a total consideration of $26.9m
In June 2019, EG7 acquired 100% of shares in British game development FPS-focused studio Antimatter Games for around $170k with $400k cash balance
In June 2019, EG7 acquired 100% of US-based creative marketing agency Petrol Advertising for up to $23m
In June 2018, EG7 acquired Norwegian game development studio ARTPLANT AS for up to $120k upfront, with an earn-out consideration of ~465k shares
?EG7 Financial Performance
According to Enad Global Interim Report, in the fourth quarter of 2020, the company generated about $24.9m (SEK 210.3m) of the total revenue, compared to $18.4m (SEK 155m) in Q4’2019, and approximately $0.97m (SEK 8.2m) of adj. EBITDA, compared to $1.7m (SEK 14m) in the fourth quarter of 2019
During the CY2020 EG7 generated about $244.5m of total revenue (SEK 2,061m) and $77.3m (SEK 652m) of adj. EBITDA, including the recent acquisitions of BigBlueBubble, Piranha Games and DayBreak Game
