Financing for gaming companies has seen an upward trend in the first quarter of 2024, with both mergers and acquisitions (M&A) transactions and private placements experiencing modest gains. According to Drake Star Partners, there were 47 M&A transactions totaling $2.4 billion in disclosed funding during this period. While the transaction volume is below the peak of 2022, it represents a 15% increase from the average deals closed per quarter in 2023.
The acquisition of Jagex for $1.1 billion was a significant contributor to Q1’s M&A total. However, disclosed deal value remains volatile, with three deals accounting for 75% of the quarter’s total. Private equity firms like CVC and Haveli are expected to increase their activity in the gaming industry throughout 2024.
In terms of private placements, there was also a significant increase in value in Q1 2024. Disney’s $1.5 billion investment in Epic Games was a major outlier among the 188 transactions, accounting for 63% of the value of all private placements made in the quarter. Furthermore, the vast majority of private placements (88%) went to early-stage start-ups, as later stage financing is challenging due to decreased valuations.
One interesting finding from Drake Star’s report is that blockchain gaming companies accounted for 40% of the quarter’s private placements, a higher proportion compared to 2023. This upswing may be attributed to the recent rally of cryptocurrency markets.
When it comes to venture capital funding in the gaming industry, Bitkraft Ventures, A16z, Griffin Gaming Partners, Play Ventures, and VGames emerged as the top VC funds over the last year. Looking ahead, A16z’s Gaming Fund II worth $600 million and Bitkraft III totaling $275 million are expected to drive further growth.
Drake Star also updated its gaming index, which tracks the performance of public gaming companies. The index now includes thirty companies, with eight new additions and three removals. The index has been relatively flat from January 2023 through March 2024, with some companies outperforming the S&P 500 but most underperforming its 36.5% growth during this period.
Overall, the financing landscape for gaming companies in the first quarter of 2024 shows signs of growth and potential opportunities for both M&A transactions and private placements. The presence of blockchain gaming companies and the emergence of new venture capital funds further contribute to the industry’s positive outlook.