Does Take-Two's Latest Acquisition Mark The End Of M&A In Mobile Gaming?

After a fairly decent 2016, gaming industry M&A could stall or slow this year, with the decline seen as a function of frenzied deal activity by companies in recent times that could keep them off the negotiation table, at least in the near to medium term.

Here Are Some M&A Deals In The Space

• In January this year, a consortium of investors from Asia, represented by United Luck Group Holdings Limited, acquired "Talking Tom" developer Outfit7 for $1 billion.
• Take Two Interactive Software Inc TTWO recently announced its acquisition of privately-held Spanish company Social Point for $250 million in cash and stock. The company had reasoned that the buy would boost its revenues from recurrent consumer spending.
• In July 2016, Online casino-style games unit Playtika Ltd owned by strong Caesars Entertainment Corp CZR was sought for by Chinese investors — led by Shanghai Giant Network Technology Co. for $4.4 billion.
• Around the same period, Tencent Holdings Ltd TCTZF and its partners agreed to buy Finland's Supercell Oy, the maker of "Clash of Clans," for $8.6 billion.
• Activision Blizzard, Inc. ATVI completed its acquisition of "Candy Crush" maker King Digital Entertainment PLC KING for $5.9 billion in February 2016.
• China Mobile Games & Entertainment Group, which was then listed on the NASDAQ, was taken private in August 2015 and was subsequently listed in Shenzhen through a reverse merger.
• Vivendi SA (ADR) VIVHY succeeded in acquiring Gameloft in a hostile takeover in June last year.
• Vivendi announced in December 2016 that its stake in Ubisoft, led by the Guillemot family, has increased over 25 percent. If the holding crosses the 30 percent threshold limit, it is required by the French law to make an offer for the target company. Incidentally, Vivendi wrested Gameloft from the same family.

Why Is The Space Hot?

Digi-Capital foresees mobile revenue growth of 8.1 percent CAGR to $48 billion by 2020 from$35 billion in 2016. The recent M&A wave shows that the buyer is balancing business with more exposure to the largest of the games growth markets in mobile.

More Mobile Gaming M&A In The Pipeline?

The deal activity in the mobile gaming industry could cool off in the coming months. That would mean Zynga Inc ZNGA and Glu Mobile Inc. GLUU would be left without any party being interested in them.

Zynga is going through testing times. Ever since it shifted its focus to mobile devices, the company has not been able to mimic the success it tasted with its early games such as "Farm Ville" and "Words With Friends." This is reflected in the decline in its monthly and daily active users' statistics. The company is due to release its financial results on Thursday.

However, Glu Mobile has found unparalleled success with its "Kim Kardashian: Hollywood," which was released in 2014. The company is a pure play mobile games maker. None of the subsequent releases tasted the kind of success "Kim Kardashian: Hollywood" had. Accordingly, the company has seen a drop in gross bookings in six of the past seven quarters.

Even as Zynga and Glu Mobile contend with issues that have served to strain their financials, a look at whether they have a Knight in Shining Armor seeking to resurrect their fortunes show that the chances are remote. Mobile gaming M&A could cool off in 2017 after fairly decent, robust activity in 2016. That said, the kind of diversification being made by tech giants, including Apple Inc. AAPL, Alphabet Inc GOOG GOOGL, Facebook Inc FB and Microsoft Corporation MSFT, interest could emerge from unexpected quarters. These potential acquirers are awash with cash and they would be more than happy to snap up a weakling in a hot and happening space at a bargain price and then work toward its turnaround.

Image Credit: By Marco Verch - Mafia 3, CC BY 2.0, via Wikimedia Commons