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Record-breaking 2012 for gaming M&A sets the stage for 2013

The global gaming market saw a record-breaking year for mergers and acquisitions in 2012, according to figures from global investment bank, Digi-Capital, giving some foresight into what the industry can expect in 2013.

Digi-Capital’s in-depth review of the lucrative international market for video gaming showed that the $4 billion value of the M&A deals carried out in gaming across the globe was higher than ever before – but the deals making up that total were a different matter.

The statistics showed that the $4 billion total was a rise of 18 per cent from the $3.4 billion that was registered in 2011, but the number of deals actually taking place dropped significantly. In fact the total transactional volume of deals that went through fell by 27 per cent. The figure is a clear indication that a high proportion of the M&A activity taking place among gaming companies during the year was for big-ticket deals, reflected in the 60 per cent increase in the average transaction value, to $49 million.

With mobile technology surging to the fore in 2012 and only expected to become more ubiquitous in 2013, the high volume – and value – of mergers and acquisitions of mobile platform game companies seen in 2012 was not unsurprising, with more of the same expected in 2013.

Mobile gaming M&A deals accounted for 27 per cent of the total transaction value in 2012 – second only to multiplayer online (MMO) game deals with 38 per cent. It came out on top, however, in terms of the volume of deals carried out, accounting for 28 per cent of all of the deals done, with MMO trailing behind with 20 per cent of the total.

2013 is likely to see many companies demonstrate the lessons learned from the situation that Zynga found itself in during 2012. The social gaming company – the business that created Farmville and made Words With Friends a success – saw its stock market price tumble on the back of weak earnings. This made the industry more cautious of smaller transactions, but there are still companies that are capable of generating revenues exceeding $1 billion from just one game, which is likely to help maintain M&A buoyancy among the smaller companies.

The international aspect of the M&A market was also highlighted in the report, pointing to the growing power of the highly-developed Asian markets in South Korea, Japan and China. Seven of the top ten largest deals were made by buyers from these markets, with Digi-Capital predicting that it will lead to China owning the largest potential share of revenue for online and mobile games with by 2015. The future for these markets still have some hurdles to pass yet, however, which could hamper future deals. The most significant of these hurdles is seen to be the perceived knowledge and relationship gap between the Asian markets and the Western markets.

Digi-Capital pointed to the free-to-play game segment as the arena that is set for the greatest level of fluidity and potential. Gaming companies could be clamoring to snap up smaller businesses in this field due to the continuing overall shift towards this platform. Free-to-play games are expected to be behind 55 per cent of mobile and tablet app revenues by 2016, when they are predicted to account for 93 per cent of all app downloads.