? Acquisition
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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
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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:
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75% of shares will be subject to a 24-month lock-up period
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25% of shares will be subject to a 6-month lock-up period
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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
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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
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The transaction is expected to be completed in Q1’21
? Strategic Rationale
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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)
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EG7 further diversifies its product portfolio by adding publishing licenses for F2P MMORPGs (Lineage 2, Ragnarök Online, and Point Blank)
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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
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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
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The majority of the games are developed by South Korean gaming companies NCSoft, Zepetto, and Pearl Abyss
? EG7’S Latest Acquisitions
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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:
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$260m of an up-front consideration, of which $160m paid in cash and $100m paid in shares
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$40m of differed consideration paid in cash, upon the finalization of the Company’s financial statements for 2020 CY
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In November 2020, EG7 entered into an agreement to acquire Piranha Games for a total consideration of $73m, including:
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$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
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up to $48.8m of an earn-out during the period of 2021—2025, with 50% paid in cash in EG7 shares
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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
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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
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In June 2019, EG7 acquired 100% of shares in British game development FPS-focused studio Antimatter Games for around $170k with $400k cash balance
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In June 2019, EG7 acquired 100% of US-based creative marketing agency Petrol Advertising for up to $23m
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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
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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
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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
