DDM: Gaming Investments in Q4 2023; 2023 Results and 2024 Forecasts
A comprehensive outlook with a lot of interesting data inside.
Results for 2023 and Future Forecast
There are no companies too big for M&A deals. Activision Blizzard and Microsoft took 633 days from announcement to prove this. The deal amount - $68.7 billion.
Saudi Arabia's influence will continue to grow. Acquiring Scopely ($4.9 billion) and investing in VSPO ($265 million) is just the beginning.
Embracer Group has grown to a scale it couldn't sustain.
DDM expects the Chinese market to stagnate amid regulatory rhetoric from authorities.
In 2023, there were the highest number of undisclosed M&A (78%) and investment (28%) deals in history.
eSports is experiencing a crisis. The best demonstration is the purchase of FaZe Clan for $17 million. This is a company that went public through SPAC in July 2022 with a valuation of $725 million.
In 2023, there were 214 investment deals (-57% YoY) totaling $1.4 billion (-72% YoY) in blockchain projects. This is 35% of all gaming investments (-34% compared to 2022). FOMO among investors has ended.
AI is one of the few bright spots of 2023. There were 61 deals totaling $319 million (including a $54 million Series A round for Futureverse). DDM expects sustained interest in AI startups, albeit less explosive than in Web 3 projects.
Since 2020, Poland has had 34 gaming IPOs - three times more than in the US. In 2023, there was only one IPO through SPAC - MultiMetaVerse merged with Model Performance Acquisition Corp.
Accelerators are playing a more significant role in the gaming ecosystem. For example, Speedrun from Andreessen Horowitz invested $500,000 checks in 32 companies.
Companies are becoming interested in Africa, as evidenced by deals with 24 Bit Games and eSports provider Galactech.
Australia wants to compete globally. In 2023, there was a 217% increase in investments in local companies. The government awarded 35 grants to local studios.
Fortnite, Minecraft, Roblox, and UGC continue to grow and attract investor interest. The most notable transactions are Gamefam ($16.5 million); Pahdo Labs ($15 million) and Melon ($3.3 million).
Rockstar Games acquired RP server developer FiveM and RedM - Cfx.re company. Everyone expects Grand Theft Auto VI to feature an RP mode in multiplayer.
2023 Results in Numbers
Overall Results
In 2023, there were 787 deals totaling $81.1 billion. The deal between Microsoft and Activision Blizzard accounts for 85% of the total volume in 2023.
Private investment totaled $4.4 billion in 2023 (-69% YoY) through 616 transactions (-35% YoY). However, in terms of the number of deals, the result was better than pandemic-ridden 2020.
Excluding the Microsoft-Activision Blizzard deal, the volume of M&A transactions in 2023 was $8 billion. There were a total of 146 transactions. This is the lowest figure since 2019.
12 companies went public in 2023, with a total valuation of $619.3 million (-60% YoY). This is the lowest figure since 2016.
In 2023, there were 415 deals with game developers (-57% YoY) totaling $2.2 billion (-72% YoY). This is excluding M&A and IPOs. Despite the decline, the share of deals with developer studios in 2023 increased to 67% of the total private investment volume. The previous record was in 2013 (63.5%).
In 2023, 119 funds (-20% YoY) announced raising funds totaling $45.4 billion (-54% YoY).
Private Investments
In the second half of 2023, there were 270 venture investment deals totaling $2.1 billion. This is 4% less in volume and 22% less in quantity compared to the first half.
DDM expects venture investment activity in 2024 to remain at 2023 levels.
Saudi PIF still has over 75% of unallocated capital. It is expected that the company will continue to actively deploy funds.
Large Chinese companies will continue to try to gain a foothold in the West against the backdrop of regulating the local market.
The crypto winter is over, so an increase in venture activity in blockchain can be expected in 2024.
M&A and IPO
In the second half, the volume of M&A deals amounted to $76 billion (73 deals). Of course, this includes the acquisition of Activision Blizzard for $68.7 billion.
The trend of layoffs will continue in 2024, including from large companies. ByteDance, Epic Games, Unity have already started.
There will be more opportunities for cheap M&A deals on the market as independent companies find it difficult to stay in the market.
The IPO market is stable - 3 transactions per quarter, most of which are on the Polish market. The boom seen in 2020-2021 will not return for a long time.
Q4 2023 Results - Private Investments
In Q4 2023, there were 119 deals (-21% compared to Q3) totaling $936.6 million (-22% compared to Q3). This is the first quarter since Q3 2018 when the volume of venture investments in games was less than $1 billion.
33% of the volume went to mobile startups; 20% to MGC (a segment DDM allocates to multiplayer projects, including metaverse projects); 18% to tech startups; 15% to AR/VR; 11% to PC and consoles; 4% to eSports.
In terms of the number of venture deals, 30% went to mobile; 25% to tech startups; 14% to PC/console studios; 13% to eSports; 9% to MGC; 8% to AR/VR; 1% to browser projects.
In the fourth quarter, there were 29 undisclosed venture deals (24% of the total). The average for previous periods is 17%.
Q4 2023 Results - M&A
The deal volume amounted to $69.9 billion. Excluding the Activision Blizzard deal - $1.2 billion. There were 42 transactions (41 without AB). This is an 80% decrease in volume compared to Q4 2022.
The valuation of companies went public was $112 million (+257% YoY).