? Acquisition
Dublin-based technical & creative gaming services provider Keywords Studios (LON: KWS) has entered into an agreement to acquire a US-based provider of PC/Console game development services High Voltage Software for up to $50m, including:
an up-front consideration of $23.75m of cash and an equivalent of $9.75m in ordinary Keywords shares
up to $16.5m of an earn-out, based on the full year 2021 performance of High Voltage Software — the studio is expected to generate $9m in earnings in 2021
Based on the expected target’s EBITDA for 2021, the transaction multiples are: 3.7x upfront EV/EBITDA’21 and 5.6x total EV/EBITDA’21
With this acquisition, Keywords gets an experienced team of developers, who created games for various platforms and engines. Moreover, a recent collaboration with Epic Games on their flagship game Fortnite surely gave the team additional expertise in Unreal Engine development
Keywords Studios has also acquired 2 companies:
London-based PR agency Indigo Pearl for up to $2.7m, including:
upfront consideration of $1.48m in cash and an equivalent of $675k paid in new ordinary shares upon expiration of twelve months from the date of the acquisition, which will also be subject to market provisions for a further year
an earn-out consideration of up to $540k, based on the agency’s results for 3 years
Indigo Pearl is expected to generate $2.4m of revenue and $378k of adjusted EBITDA for the full year of 2020
Based on the expected target’s EBITDA for 2020, the transaction multiples are: 5.7x upfront EV/EBITDA’20 and 7.1x total EV/EBITDA’20
Milan-based audio production and recording studio Jinglebell for a total consideration of $2.2m, of which $1.84m paid in cash and the equivalent of $367k paid in new ordinary shares upon expiration of twelve months from the date of the acquisition, which will also be subject to market provisions for a further year
The studio is expected to generate $2.57m of revenue and $122k of EBITDA for the full year of 2020
Based on the expected target’s EBITDA for 2020, the transaction multiple is:18x EV/EBITDA’20
These two acquisitions will expand the list of marketing and audio services of Keywords Studio, which is another step towards the Keywords strategy of becoming a full-scale service provider for the gaming industry
? Products
Founded in 1993, High Voltage Software has participated in the development of 100+ titles across multiple genres, including such AAA projects as Fortnite, Saints Row, and Mortal Kombat. This year, High Voltage has worked on the VR action game The Walking Dead: Saints and Sinners, as well as Fortnite’s Seasons 12/13
High Voltage Software has also expanded into VR with such games, as Dragon Front, They Live To Destroy!, and Damaged Core. The former is also known as the first cross-platform Oculus Rift and GearVR title
Jinglebell specializes in sound design and soundtrack production for video games and commercials. Among its clients are such companies, as Activision, Electronic Arts, Sega, Square Enix, and others
Indigo Pearl is a PR agency, that works in the video games sector, and provides traditional, social media and influencer-driven campaigns, as well as management solutions for its clients
? Keywords Studios’ Latest Acquisitions
In November 2020, Keywords entered into an agreement to acquire Los Angeles-based games and entertainment marketing agency g-Net Media for up to $32m, including:
an up-front consideration of $18m, of which $14.4m paid in cash and $3.6m paid in ordinary shares upon expiration of twelve months from the date of the acquisition, which will also be subject to market provisions for a further year
up to $14m of an earn-out consideration paid in cash and shares, based on g-Net performance for the first and second year of the acquisition
In September 2020, Keywords acquired US-based developer Heavy Iron Studios for about $13.3m
In August 2020, Keywords Studios acquired London-based creative gaming marketing agency Maverick Media Limited for a purchase price of up to $4.76m, including:
an upfront payment of $3.17m in cash and $0.4m in new shares
an earn-out consideration of $1.19m payable in a mix of cash and shares
In June 2020, the company acquired a UK-based provider of specialized game development services provider Coconut Lizards for $2.5m
In 2019, Keywords Studios made 9 acquisitions (Sunny Side Up, AppSecTest, GetSocial, Wizcorp, Descriptive Video Works, TV+SYNCHRON, Ichi, Syllabes, Kantan) for a total amount of $25.8m
?Keywords Studios’ Financial Performance
Keywords Studios’ revenue during the first half of 2020 was $207.6m, which is 13% higher, compared to the same period of 2019, while adjusted EBITDA was $36.8m, +19% compared with the same period of 2019
SOURCES: KEYWORDS-HVS, KEYWORDS-INDIGO&JINGLEBELL, IRPAGES, GAMEINDUSTRY
