M&A Hitting New Highs, GamesBeat presentation

@CorumGroup GamesBeat: San Francisco 2014

San Francisco 2014 Alina Soltys Senior Analyst

2 @CorumGroup GamesBeat: San Francisco 2014

Corum – Sell Side Advisory Firm §  Established in 1985.

§  Focused on transacFons in technology products and services businesses.

§  Professional staff drawn from senior posiFons at technology companies.

§  300+ M&A transacFons. Over $7 billion in transacFon value.

§  25+ year relaFonships with global soSware companies.

§  Most extensive database in the industry (approx. $25 million invested).

§  Integrated global operaFons; transacFons in 21 countries.

§  EducaFonal Leader, creator of the world’s most a\ended tech M&A conference, sponsor of the

World Financial Symposiums, frequent guest on CNBC, MSNBC and other industry events.


Overview

Technology M&A Update

Gaming M&A Update

Driving Trends


Technology Index: Quarterly

Subsectors: VerFcal, IT Services, Internet, Infrastructure, Horizontal, and Consumer


41 39

33

20 18 17 17 16 15 14 14 14 14 14

Top Strategic Acquirers: 2013 -‐ YTD


41 39

33

20 18 17 17 16 15 14 14 14 14 14




*


RepresentaFve M&A TransacFons Acquirer: Facebook Target: Oculus RiJ Deal Value: $2 Billion Date: April 2014

Sold to

Following the AcquisiQon

Target: Carbon Design Group Acquirer: Oculus VR Transaction Value: Undisclosed

Sold to

Target: Jenkins Software (RakNet) Acquirer: Oculus VR Transaction Value: Undisclosed

Sold to


Ba\le of Chinese Giants: Tencent vs Alibaba

§  Invested $120M into Kabam – $1bn ValuaQon

§  Just in 2014, spent over $4B on 4 acquisiQons

§  Expanding beyond eCommerce

§  Invested into CJ Games -‐ $500M (28%), Kakao Talk ($63M) & DST ($300M)

§  40 investments since 2011

§  Top Sectors: Gaming, social, photo, data mgmt. / data integraQon

Source: CBInsights


Ba\le of Chinese Giants

§  Invested $120M into Kabam

§  Has spent over $4B on 4 acquisiQons in 2014

§  Expanding beyond eCommerce

§  Invested into CJ Games -‐ $500M (28%), Kakao Talk ($63M) & DST ($300M)

§  40 investments since 2011

§  Gaming top but also social, photo, data mgmt.

Chinese internet companies led by

Tencent & Alibaba :

149

$17B AcquisiQons & Investments

Value since 2012

According to Bloomberg


Overview


Gaming M&A Update

Driving Trends


0

10

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40

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$0.0

$1.0

$2.0

$3.0

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$10.0

2009 H1 2009 H2 2010 H1 2010 H2 2011 H1 2011 H2 2012 H1 2012 H2 2013 H1 2013 H2 2014 H1

Reported Gaming TransacFons TransacQon Value ($B) Billion Dollar + Total Deals

TransacFons in the Gaming Ecosystem

Sources include company filings and releases, industry databases and Corum Group. •  Both majority and minority deals included. •  TransacQons relaQng to the gaming ecosystem were included, not limited to gaming studios.

•  Only announced or available deal values included.


Source: Corum

0 10 20 30 40 50 60 70 80 90 100

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

2009 H1 2009 H2 2010 H1 2010 H2 2011 H1 2011 H2 2012 H1 2012 H2 2013 H1 2013 H2 2014 H1

Reported Gaming TransacFons TransacQon Value ($B) Billion Dollar + Total Deals

TransacFons in the Gaming Ecosystem

Deal Volume Highest in 2 years Record 2013 & H1 2014 Excluded Billion $ TransacQons:

•  H2 2013 : $3.05B •  H1 2014: $2.27B

$0

$50

$100

$150

2009 H1

2009 H2

2010 H1

2010 H2

2011 H1

2011 H2

2012 H1

2012 H2

2013 H1

2013 H2

2014 H1

in M

illions

Average Deal Size Trending

Average Deal Size: 5 Year Growth : 98.9% $42m to $84m YoY: 57% $53.5m to $84m


Asian Dominance Increased, Focused Regionally

Source: Corum

$1.53B for 51%

$330M for 40%

$1.4B for 6%

Global TransacFons

Top 7 of 10 Deals Top 9 of 10 Deals (2013) (2012)

ChangYou will invest $600M in mobile game

developers

South Korean GameVil sets $150M+ for M&A / investment. Acquires Com2uS &

Nine Wheels plus other partners.

$200M – AcquisiFon $200M – MarkeFng $200M – Rev Share


Stranger than Usual

Reverse Take-‐Overs by tradi)onal companies entering gaming space

Glass company buys MMORPG developer WuShen for $150M

Chinese ConstrucFon company spends $960M on FunPlus

Umbrella company spends $600M buying YouZu


Cross-‐PollinaFon between Industries Changyou:

51% stake in MoboTap for $91M Creator of Dolphin Web Browser

Amazon: Acquired Twitch for

$970m

Partnership between Xiaomi & Ouya:

Bringing new channel Qtles for Xiaomi’s MiBox & MiTV devices


Overview


Gaming M&A Update

Driving Trends


Messaging DominaFon

Dedicated Gaming Fund

$25M

+ + = 1B+ Users

$100M IPO Raise Expected

$100M Fund managed through Line Ventures

10% Stake


Candy Crush Saga uniFng with WeChat

Key Markets Exposed to Candy Crush through WeChat

Top 20 in US

Top 80 in China


Consoles adopFng FTP Model

$30M+ in MicrotransacFons

“Console-‐tainment”

Source: SuperData

$2B $2.5B Revenue Growth (YoY)

$295M $352M in 2012 in 2013

Worldwide Console Spend

MicrotransacQons


Security Concerns Heightening

Especially relevant to oumits with payment systems

97% of all mobile malware*

*Predominately in Middle East & Asia

Global TransacFons

RoMaster

Mobile Is Here: Record amounts of internet traffic


A\racFve Traits of Companies Industry Traits of A\racFve Companies § Highest performers grow 100%+ annually while generaQng 20-‐50% EBITDA margins § Spread across mulQple plamorms – developed in unison with the intent from beginning

§ ConQnuous, low-‐cost development pushes to game – maintain player interest § AnalyQcs – key to improve and build upon performance; oJen in-‐house systems

Key Themes Driving Gaming M&A

F2P Infrastructure Unique IP Proven MoneFzaFon

Geographic Strength

@CorumGroup GamesBeat: San Francisco 2014

Thank You www.corumgroup.com

Alina Soltys For copy of the presentaFon: [email protected]


Top Asian Gaming Acquirers

Source: CapitalIQ, Last 2 years

10

10

4 4

3 3

2 2 1 1 1

50%+ Growth

50%+ Growth

235% Growth


Billion Dollar ConsolidaFon Spree

Acquirer: Aristocrat Technologies Target: Video Gaming Technologies Deal Value: $1.3B Deal MulFple: 5.5x Revenue Date: July 2014

Sold to

Acquirer: GTECH Target: IGT Deal Value: $6.4B (cash plus debt) Deal MulFple: 3.0x Revenue Date: July 2014

Sold to

Acquirer: ScienQfic Games Target: Bally Technologies Deal Value: $3.3B Deal MulFple: 3.7x Revenue Date: July 2014

Sold to

Acquirer: Global Cash Access Target : MulQmedia Games Deal Value: $1.2B Deal MulFple: 5.5x Revenue Date: Sept 2014

Sold to


Social and Real Money Casino Companies

21%

11%

9%

7% 6% 5%

Rest of Market**

41%

Social Casino Game Market Share -‐ 2Q14

SOCIAL ONLY

MOBILE ONLY

Real Money:

Legal: UK

Limited States: Delaware, Nevada, New Jersey

$2.7B Social Casino

Gaming Market

46%

20% on Mobile & Growing

of Top 100 Publishers have at least one social casino game

Source: App Annie, Eilers Research


Games as a Service

Source: Wandoujia. April –November 2013

Top $100M+ Games 90%

FTP

ConFnuously delivering new value to Gamers

• Players pay as they go & what they use -‐ “FTP” Service Concept

• StarQng with trailer thru game play, online presence, community, etc. All Encompassing

• Strong analyQcal soluQons and strategies • Keep the users coming back MoneFzaFon is Key

Business

M&A Hitting New Highs, GamesBeat presentation