Mobile Gaming M&A Playbook: How to Identify and Target High-Growth Gaming Companies

May, 2023 —
Sensor Tower’s Game Intelligence, powered by our Store Intelligence
product, gives unparalleled insight into must-know gaming industry trends.
Mobile Gaming M&A Playbook:
How to Identify and Target
High-Growth Gaming Companies

Following a year of massive growth for mobile gaming, Jam
City’s recent acquisition of Ludia adds yet another high-impact
partnership to the mix, capitalizing on the strong M&A trend the
gaming industry has been closely following. According to Sensor
Tower’s Mobile Market Forecast, gaming is poised to reach $138
billion in player revenue in 2025 (up significantly from 2020’s $80
billion in gross revenue). During this period of unprecedented
growth in the mobile gaming market, investors, large publishers
and indie developers alike are seeing an opportunity to claim a
larger piece of the mobile gaming revenue pie. With increased
competition in gaming, top gaming companies seek to mitigate
competitive threats, diversify their offerings, and build strong
partnerships. The result is a flurry of mergers and acquisitions in
the mobile gaming space.
Last year, legacy mobile gaming publisher Zynga spent nearly
$2 billion on its acquisitions of Peak Games and Rollic in 2020.
In the first quarter of 2021, acquisitions reached a high with
roughly $39 billion in value from over 280 announced and closed
deals. One of the most closely watched deals was longtime
powerhouse publisher Electronic Arts’ $2.1 billion acquisition of
Glu Mobile (publisher of the popular games Design Home, Tap
Sports Baseball, and Kim Kardashian Hollywood) and $1.4 million
acquisition of Playdemic (known for Golf Clash). Gaming holding
companies such as Embracer Group and Stillfront have also raised
notable amounts of funding specifically for future acquisitions. Coming off of its 11 studio acquisitions (including mobile
developer IUGO Games) in November of 2020, Embracer Group
has already raised $2 billion in 2021 for upcoming acquisitions.
In August 2021, Embracer continued its momentum by acquiring
Crazylabs, a top 3 hypercasual games developer, along with a
slew of other studios. This recent activity has shown that M&A
is becoming not only a viable but extremely attractive way for
capital-rich game companies to expand their portfolio.
Needless to say, M&A in the mobile gaming space is a hot topic
that isn’t disappearing anytime soon. For those considering
acquisitions or simply curious on how to keep pulse on the latest
genres, this M&A guide can help. It’ll walk through advantages of
M&A, how to keep tabs on the gaming industry, and important
considerations for evaluating targets. Since these transactions are
millions and even billions of dollars, it’s up to acquirers to deep
dive into where the gaming industry is going. After all, failure to
understand the market leads to poorly timed and unsuccessful
acquisitions.
What is M&A and who is doing it?
Mobile Gaming M&A Playbook: How to Identify
and Target High-Growth Gaming Companies

Diversify Portfolios
To keep up with increasing competition, large publishers have
sought out growth opportunities beyond their original domain
of expertise. Zynga, for example, expanded far beyond its original
casino space with its 2020 acquisition of hyper-casual studio,
Rollic, adding to its existing portfolio of puzzle, merge, and other
genres. In August 2021, Zynga announced that it would acquire
Golf Rival and developer StarLark for $525 million, hot on the trails
of Electronic Arts’ acquisition of Golf Clash (by Playdemic).
Another recent example is Plarium, which has established
expertise in mid-core RPG and raked in over $700 million in
revenue with RAID: Shadow Legends. However, as the mid-core
audience grew more concentrated, Plarium sought opportunities
to enter the casual space by acquiring Futureplay, the developer
of Merge Gardens. According to Sensor Tower’s estimates, the
Merge sub-genre has increased by 25% in YoY revenue, pointing
to the robust growth for merge games, as well as the puzzle
genre overall. These types of partnerships, as seen with Zynga/
Rollic and Plarium/Futureplay, are beneficial because they allow
companies to round out their portfolios and smoothly capture a
new type of audience.
What are the major goals of M&A?
Identify Synergies
For a larger publisher, M&A can also be a great way to buy out
competition, while also acquiring talent, improving blindspots,
and achieving greater scale. Electronic Arts, well-known for
its sports games (including Madden NFL, NHL, FIFA) and now
Playdemic, pairs well with Glu’s mobile sports games, specifically
its MLB Tap Sports Baseball series, which has generated over $300
million in all-time gross revenue. By leveraging existing expertise
on building hit games around sports IP, the companies can team
up to build a more formidable presence in this space. Additionally,
the combined strength has led to EA being ranked as “the No. 1
publisher by U.S. spending in Sports, generating approximately
$176 million during the last eight months” and capturing 45% of
the sports genre revenue.

Synergistic partnerships can also apply in other ways. By aligning
with a larger publisher through an acquisition, the smaller
developer could gain UA resources, creative strategies, and access
to a wider audience, creating a mutually beneficial partnership.
Jam City, for example, is one of the leading mobile game
developers with over $3 billion in all-time gross revenue, known
for Harry Potter: Hogwarts Mystery, Cookie Jam, Panda Pop, and a
variety of Disney IP puzzle titles. It has kept a careful eye on Ludia,
the Montreal-based developer behind multiple Jurassic World
titles and Disney Wonderful Worlds, among many other IP-driven
games. By acquiring Ludia in September 2021 and bringing on its
team of IP experts, Jam City further bolstered its reputation as a
partner of choice for top entertainment brands, while giving Ludia
the opportunity to tap into Jam City’s corporate expertise, global
resources, and a much broader audience of players for their
games.
Mobile Gaming M&A Playbook: How to Identify
and Target High-Growth Gaming Companies

Uncover Growth Opportunities Within
Gaming
While Top Charts on the Apple Store or Google Play Store may be
a good place to start, it’s crucial to monitor breakthrough games
and take note of which sub-categories are dominating the Games
category. For those with mobile intelligence tools like Sensor
Tower, diving into specific game genres paints a picture of where
the market is trending and what M&A teams should be paying
attention to. Whether the team is seeking growth opportunities
or doing market sizing, game genre analysis answers questions
such as, “What are the top sub-genres contributing to growth
in Southeast Asia?” “Within strategy games, what percentage of
revenue is driven by 4X? Which 4X titles launched in the past year
have grown the fastest?”
Sensor Tower Tip: Measure growth across various
types of games, using Sensor Tower’s proprietary genre
taxonomy, which represents 99.9% of US mobile game
revenue over the last year. Sensor Tower’s taxonomy
provides in-depth classification of genres, sub-genres,
art style, camera style, game theme, and more, powering
strategic business decisions for major developers.
Establish Criteria
Successful M&A starts with an analysis of the current business
state — Where are the product gaps? What does the business need
to remain competitive? Furthermore, this is the stage at which
important considerations such as acquisition budget, target
company size, and other criteria are established (for example,
a budget of $50 million and targeting a mid-sized, US-based
company). Among other criteria, the M&A team could then use
this information to begin building out target lists.
Sensor Tower Tip: Hone in on games that meet the
company’s criteria for downloads, revenue, ARPDAU,
publisher country, and more, with the help of Sensor
Tower’s global field filters.

Leverage Analytics for M&A
Reduce Blindspots and Keep Track of
Competitive Movement
Most people in the gaming industry are well aware of new
launches from major game publishers, which typically dominate
download and revenue growth. But what about a first-time
or relatively unknown publisher whose breakthrough game is
quickly climbing the charts? Sensor Tower equips M&A teams
with updated information on fast-growing games. Need to stay
on top of games that spike in revenue? Need to monitor new
soft launches and global launches from target publishers? Need
to filter for mid-sized publishers? Sensor Tower has M&A teams
covered with email alerts for the App Store and Google Play store.
These custom alerts are vital for busy gaming companies who
want to efficiently track acquisition targets and save time for
their teams. By staying on top of these important changes, M&A
teams can improve their understanding of a game or publisher
portfolio’s health and ensure that they don’t miss out on valuable
opportunities.

Sensor Tower Tip: Drill down into the metadata of
games to see the most successful mobile game titles that
monetize using a Battle Pass subscription or a specific
mechanic.

Build Target Lists & Track Leads
With all of the prospects M&A teams have to sift through, it is
easy to lose track of which publishers have already been reached
out to, how well they meet specific criteria, and what games are
in their portfolio. At this stage in the process, one of the most
important practices is building out an efficient workflow for
tracking qualified and unqualified leads. Now, there are many
different ways to do this depending on each team’s internal tools
and resources. Sensor Tower offers Custom Fields that make it
simple to build acquisition target lists tailored to each team’s
criteria, while weeding out unqualified leads. The target lists
can then be exported into a CSV or shared with relevant team
members. No matter which method is chosen, by identifying and
labeling games that fail to meet criteria as “Unqualified,” M&A
teams can exclude non-relevant games and publishers, resulting
in a fresh list of relevant leads each time they search.
Sensor Tower Tip: Consolidate the lead gen workflow
by tracking leads directly on Sensor Tower and taking
advantage of Custom Fields. Mobile Gaming M&A Playbook: How to Identify
and Target High-Growth Gaming Companies

Evaluating and Researching Prospects
Timing is everything in M&A, so after building out your target lists,
it’s time to analyze a target’s strategic performance. For example,
a company may be lower cost to acquire if it has seen declined
revenue and stagnant growth in recent quarters. Sensor Tower
can also provide insight into strategic changes within a publisher
portfolio, such as a stalled soft launch or a shift in genre focus.
If your company is looking to enter a certain country’s market, it
can be helpful to scan your target list for publishers with heavy
presence in that specific country.
Sensor Tower Tip: Analyze the target portfolio in
Publisher Breakdown to determine overall performance,
portfolio shifts, and top markets by downloads.
Every day, there seems to be a new acquisition in the mobile
gaming space and often, these latest deals are a good indicator
of where the market is trending. For anyone exploring acquisition
opportunities, uncover these clues by subscribing to resources
that are publicly available.

News Sources
Pocket Gamer, the world’s leading destination for the mobile
gaming community, deep dives into specific mobile gaming
trends, interviews from mobile gaming leaders, and tracks soft
launches
VentureBeat, a leader in covering transformative tech, has a
semi-separate publication called GamesBeat which covers video
games and the gaming industry
TechCrunch, a well known online newspaper focused on
technology, startups, venture capital funding, and all things
Silicon Valley. They have a Mergers and Acquisitions tag, as well as
a variety of topics that the audience can subscribe to
Bloomberg, New York-based news source that covers business
and markets news, frequently covers major market trends in the
mobile gaming industry, along with performance info on publicly
traded gaming companies
CNBC, he world leader in business and financial market coverage,
also touches on publicly traded gaming companies
Other Newsletters – Crunchbase, Seekingalpha, Pitchbook,
Middlemarket

LinkedIn Research
Although primarily known as a social network, LinkedIn can
be a fantastic resource for how companies are thinking about
the practice of M&A. Start by following companies who are
active in the M&A space (Stillfront Group, Zynga, etc.) and
influencers (Venture Capital, Private Equity, and Lawyers) who
are knowledgeable about where the market is heading and what
successful acquisitions look like. Cast the net wider by following
hashtags such as #merger and #acquisition within the mobile
space to discover recent acquisitions and public discourse
surrounding them.
Conclusion
Which company will be acquired next? What are key genres
to keep an eye on? Sensor Tower’s Game Intelligence,
powered by our Store Intelligence product, gives
unparalleled insight into must-know gaming industry
trends. To learn more about how to use Sensor Tower’s
custom features to identify acquisition opportunities,
request a demo with our Sales Team.
Other Ways to Stay Alerted
on Gaming Industry Trends
Mobile Gaming M&A Playbook: How to Identify
and Target High-Growth Gaming Companies