Game makers set for merger frenzy amid £50bn Call of Duty swoop


The global computer games market is set for a record year of deal-making.

Takeovers worth £63billion have already been announced in 2022 – the same amount as in the whole of 2021.

The biggest deal so far is Microsoft’s £50billion swoop on Call of Duty maker Activision Blizzard, which will make the tech titan the world’s third-biggest gaming company.

Game on: Microsoft¿s £50bn swoop on Call of Duty maker Activision Blizzard, which will make the tech titan the world¿s third-biggest gaming company

Game on: Microsoft’s £50bn swoop on Call of Duty maker Activision Blizzard, which will make the tech titan the world’s third-biggest gaming company

Japanese giant Sony, which is currently the top dog in the industry, has also been on the acquisition trail. 

It snapped up Bungie, the maker of sci-fi shooter series Halo, for £2.7billion this month in what could be seen to be an attempt to defend its position.

Both transactions followed another mega-deal from Take-Two Interactive, the maker of the Grand Theft Auto series, which splashed out £9.4billion on mobile phone game maker Zynga, which is the developer of Farmville.

Overall, the global video game market has racked up around £63billion of deals so far this year, with Take-Two and Microsoft contributing the lion’s share.

That is the same value of the deals done across the whole of 2021, which was itself a record and three times higher than in 2020, according to an analysis by the City broker Liberum.

The video game sector was one of few industries to boom during the pandemic as consumers turned to gaming to stave off boredom during coronavirus lockdowns.

This shift was borne out in the numbers, with the global video games market raking in £131billion in revenues in 2020, up from £106billion the previous year. This figure is expected to reach £161bn by 2024.

Alex Nichiporchik, chief executive of AIM-listed game developer Tinybuild, said 2020 had been an ‘acceleration year’ for the sector with both younger and older consumers picking up video games for the first time.

The video game sector was one of few industries to boom during the pandemic as consumers turned to gaming to stave off boredom during coronavirus lockdowns

The video game sector was one of few industries to boom during the pandemic as consumers turned to gaming to stave off boredom during coronavirus lockdowns

He added that this increased audience would not be going away, as demand remains high despite many lockdown restrictions ending last year.

The view was echoed by Liberum’s analysts, who predicted the larger audiences for games sparked by Covid-19 were ‘here to stay’ and would ‘help drive demand for more games’.

They added that this shift would benefit game developers and outsourcing agencies that provide services such as translation, art and quality assurance.

One of the big hitters is London-listed Keywords Studios, which is one of the most valuable companies on AIM with a market cap of over £2billion, larger than well-known brands including fashion retailer Boohoo and supercar maker Aston Martin.

The company is among many to have cashed in on the pandemic gaming boom, with its shares having ballooned around 90 per cent in value since the first UK lockdown in March 2020.

Meanwhile, Liberum said demand will be fuelled further post-lockdown by the rise of video game streaming, particularly as larger companies introduce subscription services in the same mould as Microsoft’s Xbox Game Pass, which offers subscribers a huge library of media games to play on devices – similar to the TV shows and films offered by Netflix.

Nichiporchik said this shift to subscriptions will also force gaming companies to adapt their business models towards attracting top talent and intellectual property as firms ‘competed for people’s time rather than their money’.

This ‘war for content’ is also driving the wave of takeovers in the sector, according to Neil Campling, a telecoms, media and tech analyst at Mirabaud Equity Research.

He noted that large technology firms were finding it ‘quicker to buy rather than build’ and that the recent spate of acquisitions was just the start.

A London-listed firm thought to be a potential target is Frontier Developments, which makes popular games based on the Jurassic Park movie franchise as well as its sci-fi spaceship simulator Elite Dangerous.

The company’s shares have fallen by nearly 56 per cent in the last 12 months following a series of profit warnings, sparking speculation that it could be ripe for a takeover swoop.

Keywords is also on the list, according to Campling, due to its expertise in ‘polishing’ games before they are put on sale, a key requirement at the top end of the market.

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