Source: nDreams

Swedish holding company Aonic’s $110M acquisition of nDreams follows an initial investment of $35M in the UK-based VR developer in March 2022. Aonic is headquartered in Sweden – the promised land of gaming roll-up strategies – and its team is split between Stockholm and the UK. Its key personnel include CPO Olliver Heins (Ex-Goodgame and Bigpoint) and CEO Paul Schempp (previously at Goldman Sachs). Its strategic approach mirrors early Embracer, focusing on acquiring small to mid-sized companies to find value through shared services.

Further details on the company are scarce, including the amount of deployable capital it has, but Schempp does have close ties to a Luxembourg-based investment company Active Ownership Capital, which presumably is backing Aonic.

Aonic's portfolio is diverse and nDreams joins PC and console developers Tiny Roar, Otherside, BKOM and Milkytea, Apple Arcade developer Red Games, and a kids' game platform Tutotoon. The common thread is a dedication to creative indie studios, with a notable absence of mobile free-to-play outfits.

The narrative that companies such as Embracer and Aonic like to tell is that they provide publishing expertise and shared services so that developers can focus on game development. Aonic’s strategy is essentially trying to beat incumbent indie publishers with an in-house team. The firm has also invested in two ad tech outfits, presumably intending to offer shared services for its portfolio companies. Considering the diversity of the studios in its portfolio, getting there in practice may prove difficult. Ultimately, it is stability and access to capital that are the most important benefits a holding company can bring as an owner.

In a sense, Aonic is cutting out the middleman. On the other hand, publisher-developer relations are sometimes antagonistic for a reason: it's in the publishers' interest to limit risk. Absorbing the risk of failed projects and financially struggling in-house studios is precisely what Embracer is dealing with – a story that Aonic will not want to retell.

Despite recent roll-up failures, there's no fundamental issue with this acquisition strategy. In order to succeed, Aonic will need deep pockets and above-average capacity in vetting its investment targets. That said, the scattered nature of Aonic’s investment bets – as well as its bullishness on nDreams specifically – is bound to raise some eyebrows.

Is VR Finally a Thing?

Founded in 2006, nDreams is known for high-end VR titles such as Synapse and Ghostbusters: Rise of the Ghost Lord. nDreams was early to pivot into VR, and has focused on VR experiences since 2013. The company has grown rapidly over the past few years and now employs around 250.

Even so, $110M for a VR studio is a lot. Aonic is banking on further future growth, and the thesis is not entirely unfounded: the installed base of global VR headsets has surged since 2019. Newzoo has estimated that active headsets from all manufacturers combined will reach 46M by 2024, which is nearing a respectable console installed base. For comparison, Nintendo Switch has sold roughly 130M units.

However, it’s not an apples-to-apples comparison. Engagement on VR compared to other forms of gaming is still abysmal, and VR revenue is not fully consumer-driven, but heavily subsidized by hardware makers like Meta and Sony. Finally, the hardware market is fragmented between Meta, Sony, ByteDance, and a number of smaller manufacturers.

active vr
Source: Newzoo

All in all, the sale of nDreams is an excellent lesson in persistence. Making games is hard, and creating VR games is extra hard. If your company can truly become the best in the world in something, you will find a buyer. Even in a relatively niche market, that can lead to very favorable outcomes. The acquisition certainly looks like a great deal for nDreams; it remains to be seen whether it’s equally good for Aonic.

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