Content is King when it comes to grabbing headline deals in the sector but with a growing focus on nurturing communities around games to maximise lifespan and engagement[i], we see opportunities for the services (community management, QA, testing, marketing and development) sub sector to return to growth after what has, in our view, been a rocky two years post Covid's sugar highs. We have seen a subdued M&A environment in the gaming sector in 2023, with activity falling from record highs experienced during 2021-22. The capital raised by gaming companies in Q1-Q3 2023 was four times lower than the average of 2021-22, during the same period, with the number of deals decreasing by approximately 23%.[ii] However, the recent news that CVC has agreed to acquire Jagex[iii], a leading developer of community based games, for a reported £910 million[iv], demonstrates private equity appetite for community driven gaming companies and provides positive signals for the wider gaming sector M&A outlook.

The last 12 months have been a period of conflicting reports – record high profile launches have been countered by news of redundancies and contraction[v]. We believe this is a right sizing to many businesses following a period of exuberance around COVID. With the stage reset we see a significant opportunity to grow from a base that is materially above pre COVID levels. The global gaming market is expected to be valued at $205.7bn by 2026, with a CAGR of 1.3% from 2021 to 2026.[vi] We believe this is a huge global market benefiting from tailwinds such as growth in developing countries[vii], the digital transition, an increasing cultural significance, and in our view, the gaming sector is well positioned to see increased deal activity throughout 2024 and beyond.

2023 global games market revenues

Source: Newzoo, Global Games Market Reports and Forecasts – January 2024 


Capitalizing on Evolving Business Models

Private equity firms and corporates aiming to gain exposure to the growth dynamics that see the 3.09 billion active video game players globally in 2023, expected to grow to 3.32 billion by 2024, face challenges associated with IP risk. Well-funded AAA studios can spend upwards of $150 million dollars[viii] to produce and market video games, with no guarantee of success, as such it can be daunting to acquire a gaming developer particularly if the goal is to produce a portfolio smaller IPs.

2023 global games market revenues

Source: Newzoo, Global Games Market Reports and Forecasts – January 2024 


Approximately 70% of games are now sold digitally[ix], with a growing emphasis on games-as-a-service subscriptions, which can create further barriers to entry, particularly for smaller operators. Once a following is established, changes in business models can offer avenues to partially mitigate these risks; the transition to digital distribution through online stores coupled with the rise of games-as-a-service subscriptions, has in our view, helped with the working capital and distribution headaches of the past. This all may allow developers to focus on IP, but the challenge of standing out in a busy market remains.

Services Businesses with potential to gain exposure to upsides from IP

We believe there is significant interest in services companies that have the capability to gain exposure to the success of IP, be it through full-service turnkey development, or providing support to scaling communities under games as a service models. In our view, one of the most attractive areas for M&A in the gaming sector for mid-market PE investors will be for services businesses with an opportunity to gain exposure to successful IP launches. An extreme example would be the previously Synova-backed Mediatonic which sold to Epic following the highly successful launch of Fall Guys – Ultimate Knockout[x], during the Covid-19 pandemic, demonstrating the potential for once services and work for hire led businesses to massively outperform by launching their own successful IP. Businesses that can benefit from what we believe are structural demand tailwinds in the market, while having exposure to upside in a more controlled manner, are highly attractive.

Technological Advancements and AI Impact

The gaming industry's increasing technical complexity can present opportunities for service providers well-versed in the latest technology used to create games. AI is a potential game-changer, offering benefits to creative services by driving efficiencies in content production. Generative AI is expected to accelerate game development[xi], enabling developers to create speech, characters, and environments more rapidly than ever, and it is anticipated to play a pivotal role in enhancing user interaction and experience across the gaming industry. Similar to open AI systems powering chatbots and image creation services, it is hoped generative AI can revolutionize gameplay, systems, non-playable characters (NPCs), and user-generated content. The gaming industry's increasing technical complexity presents opportunities for service providers with a deep understanding of technology and efficient content production capabilities. Integrating AI tools into workflows may not only increase efficiency but can also enable the creation of more effective content, and potentially lead to higher margin businesses in the sector.

The gaming industry is well positioned for increased M&A activity, driven by evolving user dynamics, technological advancements, and shifting business models. As the industry continues to grow and adapt, strategic investors, private equity, and corporates alike can find promising opportunities by identifying businesses with the right blend of services, exposure to IP, and a forward-looking approach to emerging technologies. The gaming sector, with its global reach and cultural significance, is poised for continued expansion, making it an enticing space for those looking to capitalize on the future of entertainment.

To discuss the themes and trends explored in this article in more detail, or for more information on the gaming sector, please contact Richard Darlington >



[ii] Global Gaming Deals Activity Report Q1-Q3’23 –