The gaming sector saw an M&A surge during the month of January, raising questions about what the rest of the year might bring for players in the space.
The top three largest deals announced during January all topped the billion-dollar mark and all involved gaming publishers in the interactive home entertainment segment.
Under the largest deal, Microsoft Corp. agreed to acquire video game developer Activision Blizzard Inc. for a total consideration of $77.96 billion, setting a record for video game acquisitions. Microsoft will pay $95 per share in cash for each outstanding share of Activision. Goldman Sachs & Co. LLC was the financial adviser to Microsoft, while Allen & Co. LLC was the financial adviser to Activision on the transaction. Both parties did not disclose any advisory fees.
The Microsoft-Activision deal is not only the biggest deal of January 2022, it is also the second-largest transaction since the start of 2021, with Warner Media LLC's $103.97 billion merger with Discovery Inc. taking the top spot.
Take-Two Interactive Software Inc.'s deal to acquire social game services company Zynga Inc. for $13.47 billion ranked second for January. Under the transaction, Take-Two will pay $3.50 in cash and $6.36 in its common shares to acquire each outstanding share of Zynga. JP Morgan Securities LLC and LionTree Advisors LLC are the financial advisers to Take-Two, while Goldman Sachs is advising Zynga on the transaction. The companies did not disclose any advisory fees.
As for the third-largest deal of the month, Sony Group Corp.-unit Sony Interactive Entertainment LLC agreed to acquire video game developer Bungie Inc. for $3.60 billion. About one-third of the consideration consists of deferred payments to employee shareholders and are conditional upon their continued employment and other retention incentives. Bungie, which employs about 900 people, will be an independent unit of Sony Interactive after the closing. The companies did not provide details for financial advisers.
The slew of deals in the space had some analysts questioning which gaming target might be next. Independent video game publisher Electronic Arts Inc. and Take-Two both saw investors bid up their stock price in the wake of the Microsoft/Activision deal on M&A speculation. Kagan analyst Neil Barbour in a Feb. 1 report pointed to several potential private gaming targets, noting that deep-pocketed tech firms like Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Netflix Inc. and Tencent Holdings Ltd. could be highly likely acquirers in future blockbuster video game M&A. Kagan is a media research group within S&P Global Market Intelligence.
All told, total M&A deal volume among U.S. and Canadian media and telecommunications companies declined 4.3% year over year in January.
There were 157 deal announcements with disclosed transaction values during the month, compared to 174 in December 2021. The sector had 164 deals in January 2021.
