2012 mergers and acquisitions run-rate 40 percent higher than 2011, investment in social/casual games drops

Investment bank Digi-Capital today published its Q3 update for its Global Games Investment Review 2012; the mergers and acquisitions transaction value of 2012 has already surpassed the total from 2011 but games investment (particularly among social/casual games) is far lower than it was last year.

This year’s transaction value is now at 105 percent for the entirety of 2011, meaning the run-rate to  Q3 2012 showed a 40 percent year-over-year gain. Six of the 10 largest transactions of this past quarter were made by Chinese, Japanese and South Korean groups.

2011 was a record year for M&A, with a total of $3.4 billion being generated from 113 different transactions (the average value of these being $30 million).  This year so far, though, $3.6 billion has been generated over 71 transactions with an average value of $51 million. The Zynga acquisition of Draw Something developer OMGPOP for a reported $180 million back in March obviously had an effect on these numbers, but this year has seen fewer and larger transactions in general.

According to Digi-Capital, the transactions have been particularly focused on MMO titles, mobile and social/casual games and middleware. Likewise, the company’s larger Chinese, Japanese and South Korean clients are focused on M&A in these areas, while European and U.S. clients “are fishing in similar waters.”

 

 

Games investment isn’t seeing the same kind of growth as M&A, however. In 2011, there were 152 transactions resulting in $2 billion, with an average value of $13 million. As of Q3 2012, there have been 130 transactions for a total of $591 million, meaning an average of $4.5 million. Compared to Q3 2011, Q3 2012’s transaction volume is up by 14 percent, but the value of said transactions is down by 60 percent. That said, Digi-Capital says that even if this trend persists, 2012 could still see the investment levels of 2010, which is the second-highest year). A particular point of interest is that in 2011 the social/casual field accounted for 57 percent of the year’s transaction values and 32 percent of transaction volume; as of Q3 2012 it’s only responsible 8 percent of transaction value and 11 percent of volume.

“Our original view that Social Games 1.0 is a consolidating sector could continue through Q4 2012, with 2011’s wave of VC social games investment appearing to be over,” says Digi-Capital.