Editor’s note: Tim Merel is Managing Director of Silicon Valley based tech adviser Digi-Capital.
The first 9 months of the year were brutal for games deal makers, with total deal value (i.e. dollars) across investments, mergers and acquisitions (M&As), and IPOs down 82% on last year. Of that decline, games investments fell the least at 35% below last year, games M&As deals dropped 74% and the games IPO market evaporated.
These figures actually sound a little better than last quarter when deals were down 89%, but the new numbers include two Chinese games companies that were taken private and delisted from NASDAQ this year. Exclude them, and the market is actually down 90%. The total market for games exits (selling companies or going IPO) was down 93% without the take-privates.
If the current market continues, Digi-Capital projects $4.3 billion total deal value ($2.6 billion apart from the 2 Chinese take-privates) for 2015 versus last year’s $24 billion. Deals were last at this level in 2007.
There was $0.7 billion of games investment in the first three quarters, dominated by mobile and tech/other sectors. As the State of Nevada now treats fantasy sports as gambling, we now exclude the large DraftKings and FanDuel investments from Q3 2015.
The take-privates and delistings of Chinese MMO games company Perfect World and Chinese mobile games company CMGE dominated games M&A this year. If those transactions are not considered, the total remaining $1.2 billion of games M&A is in the ballpark of a single deal out of last year’s handful of billion dollar deals like Mojang, Oculus, Twitch or FunPlus.
Where does the market go from here? A few big deals could turn things around in the next 3 months, but the market could also go sideways for a while. The last time the market dropped like this, it took 4 years to recover. Winter is here, so it continues to be a great buyers’ market.
There is more detail on who is still investing and buying in Digi-Capital’s new Games Report Q3 2015