? Acquisition
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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:
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an up-front consideration of $23.75m of cash and an equivalent of $9.75m in ordinary Keywords shares
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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
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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
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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
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Keywords Studios has also acquired 2 companies:
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London-based PR agency Indigo Pearl for up to $2.7m, including:
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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
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an earn-out consideration of up to $540k, based on the agency’s results for 3 years
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Indigo Pearl is expected to generate $2.4m of revenue and $378k of adjusted EBITDA for the full year of 2020
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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
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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
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The studio is expected to generate $2.57m of revenue and $122k of EBITDA for the full year of 2020
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Based on the expected target’s EBITDA for 2020, the transaction multiple is:18x EV/EBITDA’20
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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
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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
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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
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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
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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
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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:
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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
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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
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In September 2020, Keywords acquired US-based developer Heavy Iron Studios for about $13.3m
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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:
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an upfront payment of $3.17m in cash and $0.4m in new shares
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an earn-out consideration of $1.19m payable in a mix of cash and shares
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In June 2020, the company acquired a UK-based provider of specialized game development services provider Coconut Lizards for $2.5m
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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
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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
