South Korean social casino publisher DoubleU announced its acquisition of Turkish mobile game studio Paxie Games on December 26, 2024. DoubleU is purchasing a 60% stake in Paxie for $27M, with the remaining 40% to be acquired over the next three years for up to $40M, bringing the potential total deal value to $67M.

Although the gaming M&A market is showing signs of recovery, mobile has yet to bounce back to the same degree. Before 2022, midsized acquisitions of mobile studios were almost weekly occurrences, and perhaps that trend is beginning to resurface.

Founded in 2012, DoubleU initially gained recognition with its social casino titles on Facebook, particularly with its DoubleDown Casino titles. It also recently ventured into real-money gaming with its 2023 acquisition of Sweden-based SuprNation. Social and casual casino games continue to account for the vast majority of the company’s earnings, and most of its revenue now comes from mobile.

Paxie Games is known for its mobile merge-two title Merge Studio. The company was founded in 2021 in Istanbul, Turkey, and has raised a total of $4M to date across two financing rounds. Three of its four founders are former staffers at fellow Turkish studio Bigger Games, making Merge Studio the second merge-two game from that core team after developing Mergedom at Bigger. (Since its release, Mergedom has changed ownership twice and is no longer operated by Bigger Games.)

While Mergedom focused on merging and home design, Paxie’s Merge Studio takes a fashion makeover approach. Released in early 2022, Merge Studio scaled to $500K in monthly IAP revenue before experiencing a decline in 2023 and resurgence in 2024.

Recent scaling appears to be a result of both product and marketability improvements, and Paxie has significantly enhanced the game’s live ops over the past year. On the marketability side, the fashion theme with tried-and-true shock advertising plays a huge role, reminiscent of AppLovin's approach with Project Makeover. Paxie even directly incorporates Project Makeover's ad creatives into its own direct response campaigns — and it is getting results.

To contextualize Paxie’s business, it is useful to compare Merge Studio to some of the top merge-two titles, though it takes a more hyper/hybridcasual approach.

Overall, the genre is dominated by Microfun (Gossip Harbor, Seaside Escape), Moon Active (Travel Town), and Metacore (Merge Mansion). Market leader Gossip Harbor is making over $30M a month in IAPs, and its success can be attributed to excellence on all fronts: exceptional merge-two gameplay, best-in-class ad creatives, and aggressive monetization.

However, all of these games boast robust live operations, massive teams, and the revenue to match. Even Metacore, with a head start and a member team of more than 100, has struggled to match the growth of new contenders Moon Active and Microfun.

According to Sensor Tower, Merge Studio generated $550K in net IAP revenue over the past 30 days. Assuming a 70/30 split between ad and IAP revenue — typical for hybridcasual takes on this genre — Merge Studio’s ad revenue over the past 30 days would amount to $1.2M. This places Merge Studio’s gross 12-month forward-looking revenue at approximately $24.8M, resulting in a 2.7-time forward revenue multiple.

This is lower than the multiples we grew accustomed to during the height of the industry's M&A, but it likely reflects a discount due to the unproven staying power of the game. Besides money, what Paxie is getting is stability: DoubleU has deep coffers and an incredibly profitable core business in social casino.

So why is DoubleU acquiring Paxie? Considering its recent foray into real-money casinos, and now its entry into mobile free-to-play, the Korean company appears to be diversifying. This contrasts with similar companies like Aristocrat Leisure, which is in the process of divesting its noncasino free-to-play mobile game businesses.

While the valuation multiple isn’t exorbitant, DoubleU appears bullish about Paxie’s ability to develop future hits. Sensor Tower data indicates Merge Studio’s retention metrics are below top-performing merge-two games, meaning the business depends heavily on acquiring new users. Given the hypercasual nature of Merge Studio and the ephemeral stability of such games, acquiring Paxie solely for this title might be risky. Instead, DoubleU likely views Paxie’s potential to launch new games as the real asset in this deal.

2025 will likely see a rise in mobile acquisitions. While launching new games remains challenging, the fundamentals of mobile gaming are unchanged. As consolidation continues, companies with stable revenues in the millions or tens of millions are likely to draw attention again from bigger industry players.

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