An inside look into the world of mergers and acquisitions

Playtika recently entered an agreement to acquire the creators of Dice Dreams developer SuperPlay in a deal worth up to $1.95 billion. But how do developers know what to look for in a merger or acquisition? Is the price right? Are the two companies a good fit, and ultimately, how do you close the deal? 

With M&A activity being low over recent years, there is all the more reason to ensure that the right deals are being made. 

We spoke with The Raine Group’s partner and co-founder, John Salter [pictured left] and partner, Todd Rosoff [pictured right] to discuss how acquisitions are valued, what buyers and sellers should look for, and how companies like The Raine Group can help seal the deal through its advisory services. 

PocketGamer.biz: When it comes to big games industry acquisitions and investments, what role does a company like The Raine Group play?

John Salter: At Raine, our gaming team is comprised of individuals who have dedicated their whole careers to gaming. Todd and I, for example, have worked together on gaming deals for the better part of 20 years.

In that time, we have seen multiple economic cycles and the growth of the gaming industry, developing a deep knowledge base that differentiates us as advisors. Through our team’s continuity and consistency in covering gaming, we are able to leverage our collective experiences and long-standing industry relationships to deliver exceptional results to our clients.

We pride ourselves on being great listeners, constantly tuning in to the priorities of people in the industry. At the same time, we’re connecting with innovators and disruptors. By serving as that bridge, we’re able to create deals that feel more natural and organic. Our responsibility in the industry is to be a trusted point of connectivity. 

Why do developers need an advisor for these deals? And when should they seek out support?

Todd Rosoff: Put simply, making great games is hard, and M&A is never simple. An advisor supports the management team by bringing the level of specialised expertise necessary to confidently navigate the M&A process and extract maximum value and optimal terms.

As a seller, you may be dealing with a counterparty that’s very sophisticated and highly structured, so it’s a natural advantage to bring in an advisor like Raine, with deep experience, who can serve as an advocate to protect your goals and priorities. At every step of the way, we take as much of the work on our shoulders as possible so that our clients can maintain the necessary focus on their product roadmap.  

When should developers seek out support? Earlier than they think they need it. They might find themselves in conversations asking, ‘What are we as a company really aiming for? What is the best path for us as a company? Are there partners that might accelerate our vision?’ These are questions that deserve careful thought, and it could be the perfect moment to connect with an advisor to explore their options. Preparation ahead of any process is also critical.

At Raine, our approach is to build relationships based on trust and mutual understanding, knowing that every interaction offers a chance to share insights and open doors for the future.

Ultimately, working with an advisor is about building trust. Depending on the transaction, this could be the most significant deal of a developer’s career, so it’s crucial to trust that your advisor is equipped to guide you every step of the way.

What stages do negotiations for an acquisition go through? And how long can they typically take?

Todd Rosoff: Timelines vary depending on the nature of the transaction, but typically, from the start of preparation to a signed transaction document, you’re looking at a three-to-four-month sprint.

This also depends on the size and complexity of the transaction, which is why engaging an advisor like Raine is important to help facilitate a smooth process while also ensuring attention to detail when it matters. 

How are acquisitions typically valued in the games industry? What kind of multiple makes sense for certain types of companies?

John Salter: Overall, valuations typically depend on a growth/profitability tradeoff depending on where a company is in its lifecycle. 

In earlier stages of development, there is a lot of focus on multiples of revenue. In these cases, the focus for valuation is on top-line growth and achieving audience scale, so the reference point will be a revenue-based multiple.

As businesses reach a level of maturity, the focus transitions to profitability, and the basis of valuations shifts to EBIDTA-based multiples. Synergies will also have an impact here, whether they are revenue or cost based. 

How do companies evaluate whether they are a good fit for each other?

John Salter: There’s a lot of variability because the right fit will always depend on the specific situation. It’s essential to prioritise trust with your counterparty. Will they allow you to run your business the way you need to to achieve the growth goals you’ve set?

At Raine, our core mandate is to listen carefully to the priorities of strategic buyers – whether they’re in gaming, media, or other sectors – and connect them with innovative disruptors that meet those needs.

By truly understanding both sides, we facilitate the simplest and most complementary deals. Raine has a proven track record of identifying opportunities where relationships naturally come together, making transactions feel seamless and organic. 

What should buyers and sellers look out for when negotiating an acquisition?

Todd Rosoff: Negotiations can require tough conversations and sometimes strain relationships. Part of the value of bringing on advisors can be leading the negotiation and being that critical communication channel that can preserve the important relationships between management teams.

In fact, in many transactions, given our tenure in the industry, we know the deal quarterbacks at the buyer and that familiarity and trust can be critical in cutting through challenges that come up in a deal. After all, buyers and sellers become colleagues the day after a deal closes, and preserving that talent is the backbone of great game companies.  

Additionally, ensure you fully understand the deal structure, particularly the distinction between guaranteed value and potential or contingent value. In the case of earnout structures, sellers must have the right safeguards in place to operate and manage their business in a way that maximises the transaction’s overall value.

What current trends have you noticed in games industry M&A? Is interest in deals picking up again? What kind of things are acquirers looking for? Has this changed over the last couple of years?

John Salter: The past couple of years have been a harsh winter for the gaming industry. Industry dynamics made growth challenging for everyone, and buyer dynamics made M&A difficult. Valuations have pulled back over the last couple of years, but now, we are in a different environment post-Covid – a more rational one.

Whether it’s Playtika’s acquisition of SuperPlay, where Raine acted as advisor to SuperPlay – or other deals in progress, we’re seeing signs of the market warming up. Buyers are returning with renewed enthusiasm and momentum, while young, growing businesses are gaining traction on the development side.

With that in mind, we expect significant activity in the back end of 2024 and into 2025, and we’re ready for it. We have boots on the ground in every major gaming geography globally, and we recently expanded our team in Europe to support the ever-growing interest in gaming in the region. 

Is there anything else interesting about the deal-making process/trends that you’d like to add?

Todd Rosoff: Proper preparation is important. As a seller, you only get one shot to make a first impression when it comes to how you tell your story and how thoughtfully you present your KPIs and forecast.

The right amount of care upfront can be critical in establishing credibility and building momentum in a process later. The importance of a trusted advisor knowing where you will be tested on your numbers or diligence cannot be overstated.

As the deal-making environment heats up over the next few years and new companies come to market with innovative technologies and products, building strong relationships with potential buyers that align with a long-term vision is crucial for companies to position themselves to maximise value when the time comes to sell.