Europe’s Gaming Consolidators: The Magnificent Seven Post-M&A Rush

Just a few years ago, each week seemed action-packed with M&A news. Embracer Group would announce dozens of acquisitions at once, Keywords Studios was snapping up outsourcing firms of all kinds, Stillfront was expanding its global presence, and MTG was further venturing into gaming.

Many gaming companies have been aggressively reshaping the market landscape with acquisition-driven strategy. This article will focus on Embracer Group, Keywords Studios, Stillfront, Team17, MTG, PulluP, and EG7—the seven European public gaming companies that executed the most deals from 2020 to the present. 

The peak of M&A activity between 2020 and 2022 was partially driven by the gaming industry’s rapid growth during global lockdowns, as demand for in-home entertainment soared and many companies leveraged their highly valued shares as a purchase consideration to pursue inorganic growth strategies. However, as the post-pandemic environment brought new challenges—such as declining valuations, widespread layoffs, and an increasingly challenging market—the fortunes of these companies shifted. This article examines how these market leaders navigated the downturn and its implications for the broader industry.

In this article, we’ll cover:

1. The leading European gaming M&A powerhouses and their landmark acquisitions;
2. The financial impact of these deals on acquirers;
3. Stock performance trends during and after the M&A boom;
4. Key lessons from the rise and challenges of Europe’s M&A boom.

For a concise summary, refer to the downloadable PDF recap:

GDEV x InvestGame – Feature #6

Key M&A Powerhouses Europe

Since 2020, these seven European companies have stood out as key players in the gaming industry’s M&A and investment scene, making over 140 deals and a total value above $19B.

This aggressive growth strategy initially proved successful, with reported revenue soaring and businesses expanding by as much as 2x (e.g., KWS) to an impressive 11x (e.g., EG7) between 2019 and 2022. Below is a brief performance overview of the select 7 companies, highlighting key aspects of business changes over recent years:

Embracer Group

Swedish companies were leading the way, with Embracer Group being the M&A juggernaut completely reshaping its business, with revenue skyrocketing from $0.6B in 2019 to $4.0B by 2023. This growth was fueled by acquiring over 850 IPs and dozens of studios. Initially focused on PC & Console gaming, Embracer quickly expanded into all gaming sectors and ventured beyond, acquiring businesses from board games (e.g., Asmodee) and mobile publishers (e.g., Easybrain) to Viking merchandise shops. This aggressive expansion continued until a 7% decline in organic revenue growth by the end of FY’22. A general market slowdown led to a shift in investor sentiment, resulting in lower valuations. The lack of solid organic growth and the collapse of a $2B strategic partnership with Savvy prompted a business restructuring, splitting Embracer into three groups and leading to the divestment of Saber Interactive, Gearbox Entertainment, and, most recently, Easybrain.

Enad Global 7

A relatively similar story unfolded with Enad Global 7, which acquired Daybreak in 2020. Unlike any other company, EG7 experienced a dramatic rollercoaster, with shares surging by +600% before dropping to -30% compared to the Dec’19 price base. By examining reported financials, we observe the business facing significant challenges, including negative organic growth and AEBITDAC. In response, the company implemented management changes and divested Innova. While the stock’s market cap has improved substantially in relative terms (+65%), it’s important to note that the equity base value was below $100m at the end of 2019.

Team17

Another notable PC & console publisher and developer, Team17, nearly tripled its revenue by acquiring such studios as the indie publisher behind simulation games Astragon Entertainment, the educational kids’ studio StoryToys, and various IP rights, including shooter Hell Let Loose. Unlike other companies, Team17 maintained a more disciplined M&A strategy and stood out as the only company in our research to sustain positive organic growth during the reviewed period. While being selective with acquisitions, the company took a calculated risk by investing heavily in the AA segment, tripling its CapEx over the years. However, this strategy ultimately fell short, resulting in negative profitability, which impacted the stock price and led to a restructuring of its publishing division in Oct’23. The restructuring included significant layoffs, leadership changes, and a refocus on the company’s core indie publishing segment, emphasizing smaller game development budgets. Nevertheless, the trading valuation multiples remained above the peer group, demonstrating business attractiveness and investor’s confidence in this asset.

PullUp Entertainment

Unlike other peers in our group, PullUp Entertainment (aka Focus Entertainment) does not report organic revenue growth. While the company managed to drive topline revenue growth, it has shown consistently negative AEBITDAC despite bringing external studios in-house (e.g., Dovetail Games, Deck13) that should have improved margins. The company went aggressive in publishing budgets for AA/AAA games. This strategy didn’t pay off, as reflected in its valuation multiples, and led to restructuring alongside brand rebranding on April 24. Most recently, the company released the critically acclaimed Warhammer 40,000: Space Marine 2 (developed by Saber Interactive), which boosted PullUp revenue in H1’24, and we expect a notable positive AEBITDAC in FY24/25.

Switching to mobile players, these companies faced not only the general headwinds affecting the video game market but also a significant decline in the efficiency of performance marketing campaigns following the depreciation of IDFA in 2021.

Stillfront Group

Stillfront, one of the first European mobile publishers to adopt an aggressive inorganic growth strategy, rapidly scaled its business with 12 acquisitions during 2020–2022. Leveraging a decentralized model, the company appeared well-positioned for expansion but faced challenges maintaining organic growth at its studios after integrating into the F2P powerhouse. Last month, the company announced a business restructuring, including leadership changes. Stillfront has experienced the steepest decline in market capitalization and share price among its peers.

Modern Times Group (MTG)

Despite reporting the lowest revenue growth and experiencing four consecutive periods of negative organic growth, MTGhas emerged as the best-performing stock among selected game publishers and the only company to consistently increase AEBITDAC. A pivotal strategic move was the divestment of its esports division, ESL Gaming, to Savvy Gaming Group for $1.05B in Jan’22. The sale allowed MTG to focus entirely on mobile gaming while providing the cash to diversify its mobile portfolio across various genres, including word games PlaySimple, racing Hutch Games, and others. A few weeks earlier, MTG took another significant step toward business expansion by acquiring Plarium. This acquisition is expected to double MTG’s business, bringing combined revenue to $1.1 billion and AEBITDA to approximately $300m. Notably, the leadership team has remained unchanged, with no announcements of restructuring or strategic reviews to date.

Keywords Studios

Keywords Studios, the largest gaming work-for-hire company, clearly stands out among its peers with a robust AEBITDA profile and solid organic revenue growth. However, the company also faced challenges with organic YoY growth approaching a decline of 2% by the H1’24. Despite these hurdles, Keywords remained highly acquisitive, integrating 23 service companies into its platform. Notably, the company exercised discipline in its valuation approach, with its largest acquisition being MPG for c. $100m. This attractive financial profile and favorable market dynamics in the work-for-hire sector drew the attention of private equity. Consequently, Keywords Studios was acquired by EQT for $2.8B earlier this year.

The rise and fall of aggressive M&A strategy

Between 2020 and 2022, European gaming companies went on an absolute shopping spree. Fueled by the pandemic’s favorable market conditions and strong organic growth, these companies saw their valuations skyrocket. With elevated stock prices burning a hole in their pockets, they leveraged this newfound wealth to finance a series of acquisitions, which was, in turn, supported by their shareholders. The competition was fierce, and desirable assets fetched over 15x EV/EBITDA multiples.

But as the saying goes, what goes up must come down.

The Bubble Collapse

As market conditions started to wobble, the challenges of integrating all these new assets became glaringly apparent. Increased capital expenditures and the lack of organic growth put pressure on adjusted EBITDAC margins, causing investor sentiment to be sour. Valuations began to tumble, further exacerbated by macroeconomic factors and significant industry changes. 

Remember when Apple deprecated IDFA in 2021? That move threw a wrench in the works for mobile publishers, making targeted advertising much trickier. On the PC and console front, the AA segment struggled to compete with AAA games, which stole the spotlight in the previous year and grabbed most of the players’ attention.

The aggressive M&A strategies did shake up the market landscape and drove rapid revenue growth, but they also exposed some deep structural weaknesses. With acquirers’ share prices dipping below Dec’19 levels, companies could no longer use stock as currency to buy new assets. The era of relatively cheap investor capital was over. 

Among key factors driving investors’ confidence down were:

1. Declining Organic Growth: Reliance on acquisitions masked the lack of organic expansion.
2. Challenges in integration: Merging new assets at such a quick pace didn’t always go smoothly, potentially leading to inefficiencies.
3. High Debt Levels and inflate valuations: Companies loaded up on debt to finance acquisitions, which were often overvalued during the overheated market of 2021–2022.

Many companies now find themselves saddled with unsustainable debt and cautious investors. To make matters worse, some assets are now worth less than what was paid. To get back on track, many announced restructurings, layoffs, and leadership changes and even started selling off assets—a trend kicked off in 2023 and continues today.

New Era on the Horizon

The aftermath of this M&A boom has laid bare significant cracks in the industry’s aggressive growth strategy. The days of “growth at all costs” are gone. Over the past twelve months, we’ve seen companies making significant shifts:

• Asset Reassessment: Companies are critically evaluating what to keep and what to let go. Non-core assets are being offloaded as firms streamline their portfolios.
• Business Restructuring: The focus is shifting toward making existing operations more efficient. This includes cost-cutting measures, layoffs, and organizational changes to boost productivity.
• Cautious M&A: Future deals are likely to be more calculated and strategic. The era of massive spending sprees is over, replaced by careful consideration of how new acquisitions fit into long-term goals.
• Organic Growth: Rebuilding investor confidence by showing real, sustainable growth from within rather than relying on acquisitions to pad the numbers.
• Profitability Focus: While organic growth is essential, sustaining healthy AEBITDA margins has become crucial. Companies must demonstrate self-sustainable and generate enough cash to fuel further growth.

This trend will likely continue until capital costs decrease and we enter another bull cycle. Yet, the obstacles gaming companies have overcome over the last few years will only make them stronger and their leadership teams more experienced. After all, the video game market is still relatively young—with many European players founded only 20 years ago and listed publicly for just the last 10 years.

The industry seems poised to emphasize sustainable growth strategies to navigate these new realities. By prioritizing efficiency, strategic planning, and genuine innovation, gaming companies are adapting to the new landscape. It’s not just about growing bigger anymore; it’s about growing smarter. Investors are watching closely to see which companies can successfully pivot and thrive in this transformed market.