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E-sport and gaming, the next M&A frontier

The e-sport and gaming industry is ahead of very exciting times, as the evolution of the competitive landscape is about to accelerate dramatically across all layers of the ecosystem.

Next-gen consoles will soon revolutionize the first layer of the gaming industry.

Sony's Playstation 5, which will officially be released on 19 Nov in Europe, is indeed expected to become the best-selling console of all time, with more than 200 million units in its lifespan. The worldwide launch of Microsoft's Xbox Series X will by chance occur almost simultaneously on 10 Nov, and will offer exclusive access to Bethesda's games, recently acquired by Redmond's giant. The promise of augmented player experience only represents the tip of the iceberg. By the way, most e-sport competitions still take place on PCs, not on consoles.

Cloud gaming platforms stand at the intermediate layer, which has actually become the main battlefield globally. Tech giants fiercely compete in that arena, with the recent launch of Google Stadia (Nov 2019), Amazon Luna (Sept 2020), Microsoft xCloud (Sept 2020), Sony Playstation Now (new version in Nov 2020), Nvidia GeForce now (Feb 2020), and Facebook (soon to come). The upcoming content war is on certain aspects similar to the Netflix vs Amazon Prime Video fight for video platforms' supremacy. In a gaming market largely dominated by US giants, the absence of credible European alternative is highly noticeable. Europe still curates its specific know-how in terms of video game design, development, and publishing to help create a proliferation of creative, and sometimes very profitable, contents available on these platforms.

The upper layer gathers companies that interface with the real world, such as e-sport clubs or franchises, or gaming events planners, among other categories of actors.

E-sport companies face multiple challenges that are inherent to the industry, such as being welcomed into the most prestigious leagues, which is far from easy. Indeed, admittance into spheres that reward world-class performance with adequate prize money usually requires a significant entry ticket. Furthermore, scouting talents, providing champions with a performance-enhancing environment, and retaining them at the end of the season is also quite a challenge in such an increasingly competitive industry.

Odyssey anticipates a wave of M&A consolidation in the e-sport and gaming industry. Valuation multiples are on the rise in Europe, in the wake of the US. Capital raising rounds reach new heights in this fast-growing sector, which acts as a magnet for certain investment funds and ultra high net worth individuals. External growth may become more than a strategic option for heavily-funded e-sport companies which intend to build a global brand through the activation of new levers for revenue growth and the reach of new geographies.

E-sport and gaming is one of the most fascinating tech industries that we, at Odyssey, monitor very closely on our radar. We are pleased to offer the in-depth market expertise that we have developed over the past few years to help our clients thrive in this competitive arena.

Odyssey assists tech startups, SMEs, and large corporates in the end-to-end design and execution of strategic, M&A, and capital raising projects.

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