Through the first nine months of 2024, it’s been clear the M&A market is beginning to recover. According to the Q3 2024 Drake Star Global Gaming Report, there were 56 announced M&A deals totaling $2.5B in deal value in Q3 (where the terms of the deal is disclosed). This is up 70% year-over-year and represents the fourth straight quarter of increasing deal counts. 

For the first nine months of 2024, there have been 156 deals, compared to 164 deals in all of 2023. Assuming 42 deals in Q4 of this year (a similar seasonal drop from last year), we’ll have just shy of 200 deals for the calendar year. Due to the mammoth acquisition of Scopely by Saudi Arabia’s Savvy Games Group in Q2 last year, the announced deal value for 2024, which thus far totals $8.4B, may fall shy of 2023’s $10.5B.

The three largest deals of the year thus far have been Playtika’s acquisition of SuperPlay, EQT’s purchase of Keywords Studios, and Jagex’s sale to Carlyle. For firms like Playtika, which were once serial acquirers, it is reassuring to see them reentering the market, albeit with more prudent target selection.

Below, we will dive into three notable M&A transactions through November 2024 and offer our outlook for deal-making in 2025.

Playtika Acquires SuperPlay

In September 2024, Playtika announced its intention to buy Israeli mobile gaming company SuperPlay for $700M in cash, with a potential additional contingent consideration of $1.25B. This deal is notable for Playtika as it represents the company’s return to larger M&A since its acquisition of InnPlay in September 2023.

It also continues the company’s cautious stance of structuring deals with the majority of the potential purchase price as earnouts. The initial purchase will be funded with cash from Playtika’s balance sheet, while the remaining 65% of the consideration is based on SuperPlay meeting financial targets between 2025-2027. We discussed Playtika’s rationale in a recent deep dive here.

Playtika stock is up 29% since troughing in August, but remains 75% lower since its peak in early 2021, around the time the company had its IPO. According to Sensor Tower, consumer spending on mobile gaming declined both in 2022 and 2023, but it is expected to be up in the low single digits in 2024. This year represents an inflection point in the market, which is evident in the uptick in mobile deal-making.

After a period of adjustment following the App Tracking Transparency implementation in 2021, companies are now leveraging M&A to achieve growth. Chinese firms, historically aggressive acquirers in the gaming sector, have pulled back due to geopolitical constraints and regulatory challenges. This has opened opportunities for Western companies to dominate deal-making, with major players like Scopely, Playtika, and private equity firms capitalizing on this dynamic. However, deals remain structured with caution, often incorporating conservative earnouts tied to financial performance.

Sony Approaches Kadokawa

Earlier this month, reports emerged that Sony is in discussions to acquire Kadokawa Corporation, a Japanese media conglomerate known for its extensive involvement in publishing, anime, and gaming. In gaming, Kadokawa owns a 70% stake in FromSoftware, the acclaimed developer of Elden Ring and the Dark Souls series. Sony and Tencent own the remaining 30% as minority investors. While Kadokawa divested most of its gaming portfolio in 2022 into a new entity called Dragami Games, it also owns other developers like Spike Chunsoft and Acquire.

Kadokawa has acknowledged an initial letter of intent from Sony but has said that no final decision has been made on the acquisition. As of November 22nd, shares are up 40% from their pre-announcement levels.

Gaming is a small part of Kadokawa’s empire, comprising just 11% of net sales in the latest fiscal quarter. I believe Sony wants this asset to complement its existing anime ventures, including its ownership of streaming service Crunchyroll and production company Aniplex. Kadokawa’s extensive IP portfolio spans anime, manga, film, and games, and integrating these assets would allow Sony to create cross-media content, which has become a lucrative strategy for large entertainment companies. Sony may also have its eyes on turning the Kadokawa/FromSoft gaming portfolio into PlayStation exclusives.

M&A activity in console and PC gaming is entering a new phase. The largest players — Sony, Microsoft, and to a lesser extent, Tencent — are vying for premium assets, but their paths are constrained by different factors. Microsoft, having weathered extensive regulatory scrutiny over its $69B acquisition of Activision Blizzard, may find further megadeals challenging to pursue in the near term. Sony, meanwhile, has steadily expanded its portfolio with acquisitions like Bungie and its anime-focused ventures like Crunchyroll. A potential Kadokawa deal would fit its strategy of leveraging cross-media synergies to maximize IP monetization.

But what about the traditional publishers? While large-scale acquisitions like Take-Two's purchase of Zynga or EA's past efforts signal interest, such deals have often underperformed, leading some companies to prioritize organic growth or smaller, more strategic investments. EA’s inconsistent M&A track record, for example, has dampened enthusiasm for additional large-scale plays. Take-Two could be a more likely contender for acquisitions, but its appetite for transformative deals appears measured.

EQT Buys Keywords Studios

In July 2024, Swedish private equity firm EQT, in collaboration with Canada Pension Plan Investment Board (CPP Investments) and Temasek, agreed to acquire leading video game services provider Keywords Studios for £2.2B. The consortium offered £24.50 per share, representing a 67% premium over Keywords Studios' share price as of May 17th, 2024.

This premium points to how misaligned some public gaming companies were from their intrinsic value in the aftermath of the COVID-19 boom and bust cycle. Furthermore, EQT is a financial buyer, unlike Sony or Playtika, which are strategic buyers. Even at the 67% premium, the private equity giant believed it was getting a good deal. For additional context on the deal, refer to our recent piece, Private Equity Work for Hire.

This acquisition underscores the importance of outsourcing in the gaming industry. With the rising costs and complexity of game development, companies like Keywords play a vital role in bridging operational gaps for developers and publishers. For EQT and its partners, the deal represents an opportunity to invest in a highly specialized, scalable business with long-term growth potential. Keywords also has nearly zero net debt, and its new suitors may want to leverage the company to boost their returns.

Private equity’s growing interest in the work-for-hire industry reflects a shift in how investors perceive the gaming sector. Historically seen as unpredictable and hit-driven, gaming is now drawing interest from private equity due to its scale, recurring revenue potential, and increasing specialization. The work-for-hire segment has become particularly attractive, offering a way to tap into the $200B gaming market without the direct content risk of developing hit games.

Investors are drawn to the sector's stability and scalability. Work-for-hire studios generate revenue throughout multiyear development cycles, largely insulated from whether a game becomes a blockbuster. Furthermore, these studios benefit from the rising complexity and budgets of AAA games, driving demand for specialized outsourcing. This approach mirrors successful roll-up strategies in other industries, where smaller competitors are acquired at lower multiples, and scaled businesses are sold at premiums.

M&A in 2025 and Beyond

The gradual resurgence of M&A activity in the gaming industry through 2024 is a welcome sight after two years of challenging performance and widespread layoffs. Playtika’s acquisition of SuperPlay, Sony’s potential takeover of Kadokawa, and EQT’s purchase of Keywords Studios highlight different dynamics shaping the M&A landscape, ranging from strategic consolidation and portfolio expansion to financial investment in scalable business models.

Looking to 2025 and beyond, I believe M&A activity is poised to accelerate. Several factors underpin this optimism. First, mobile companies are recovering from the effects of ATT. Secondly, the volatility companies faced during COVID is in the rearview mirror, and the market has stabilized near its historical growth rate. This should give acquirers the confidence to underwrite M&A with greater certainty. Lastly, valuations have found their footing after ballooning in 2020-2021 and then collapsing under the weight of higher interest rates, slower growth, and margin pressures.

Private equity firms will also play a growing role in gaming M&A. As evidenced by EQT’s acquisition of Keywords, financial buyers are increasingly willing to pay premiums for gaming assets that offer scalability, recurring revenue streams, and operational efficiencies. This suggests a maturing, more rational market where operational expertise, rather than top-line growth at any cost, is recognized as a critical driver of value.

Beyond private equity, which is increasingly focused on scalable service providers like Keywords, other types of investors and strategic acquirers are also playing critical roles in reshaping the industry. Large IP-driven companies such as Disney, Netflix, and Amazon are eyeing gaming as a way to enhance engagement and monetize their content ecosystems through targeted acquisitions of studios that can deliver high-quality, cross-platform experiences.

In terms of traditional PC and console M&A, there has been a period of recalibration following megadeals such as Microsoft-Activision and Take-Two-Zynga. The broader trend is toward more measured, strategic acquisitions that align with long-term growth objectives. Furthermore, the regulatory scrutiny faced by Microsoft and geopolitical constraints on Chinese buyers like Tencent has limited the scope of deal-making.

As development costs for AAA titles rise, and the importance of owned IP grows, the next wave of acquisitions will likely focus on securing iconic franchises, co-development partnerships, and technology platforms that can help publishers maintain their competitive edge in a crowded market.

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Content Worth Consuming

The State of Indie Games in 2024 and Beyond (superjumpmagazine.com): “Anyone who was conscious in 2023 could tell you that it was a massive year for video games. Powered by years of pandemic-induced development time and a lagoon of VC cash, companies put out tremendous game after tremendous game – and the world responded. Copies flew off the shelves, critics handed out some of the best reviews ever recorded, and everyone ended the year feeling confident. And then, in 2024, everything stopped.”

Slush 2024 Livestream | Founder Stage | Day 2 (Slush’s YouTube Channel): “Slush's Founder Stage will once again delve deep into the remarkable journeys of legendary founders and companies featuring NVIDIA, Supercell, Twitch, Figma, Vinted, and more.”

The Mobile Gaming Fundraising Market (with Annina Salvén) (Mobile Dev Memo Podcast): “My guest on this week's episode of the podcast is Annina Salvén, the COO of BIT ODD, a Helsinki-based gaming studio that was recently profiled by the WSJ. Bit Odd raised $18M in a seed extension this month, following on from the €5M seed round it raised in 2022. My fund, Heracles Capital, is an investor in both rounds.”

How to Market Your Game with Chris and Joe from Ignition Facility (Building Better Games):“Marketing games is tough. The world is twisting under our feet right now, as big and small studios struggle to reach players. The world is changing, but there are things you can do. We’ve got Chris and Joe here to help you better market your game.”

What Blizzard is Doing to Make Sure World of Warcraft Never Gets Old (gamedeveloper.com): “How is World of Warcraft still going? In an age where online multiplayer games rise and fall sometime in the same year, it's a worthy question to ask. Its legions of beloved fans stick around even though its core gameplay hasn't changed much since 2004 (though it has been repeatedly overhauled and improved). Players pick a race, class, and gender, then set out into the world to complete quests, raid dungeons, and fight other players using unique spells and abilities.”

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