Gaming defined as playing electronic games conducted through multiple varieties of means, such as using computers, smartphones, consoles, or other mediums altogether has seen a tremendous rise due to digitization, higher internet bandwidth and the Covid-19. There is an increasing prevalence of high-speed internet connections, especially in emerging economies, which has made online gaming practical for more people in recent years. The market is witnessing rapid growth in terms of users and games being downloaded primarily due to the recent outbreak of the COVID-19 pandemic.

Being one of the fastest-growing industries within the past decade the gaming sector has seen a revolution, whether it be in terms of players joining or in terms of evaluation. The Gaming Market size is estimated at USD 245.10 billion in 2023, and is expected to reach USD 376.08 billion by 2028, growing at a CAGR of 8.94% during the forecast period (2023-2028), and also in terms of players joining the statistics show in 2022 the number of players was estimated to be 3.1 billion, and is expected to grow to 3.6 billion by 2025. Just taking the Indian gaming market, it is expected to grow from $2.8 billion in 2022 to $5 billion in 2025, growing at a CAGR of 28-30%. The quantity of gamers in the country will expand from 420 million in 2022 to 450 million by 2023, and may hit 500 million before 2025.

As competitive video games continue to integrate into popular culture, global investors, brands, and media outlets are all paying attention including consumers. In fact the estimated eSports viewers in the US was around 29.8 million in 2022—eventually climbing to 34.8 million by 2026. Even in the Asia-Pacific eSports Market Outlook, the market is forecasted to grow with 19.35% CAGR for 2023-2028. The report segmented the market into five major countries namely China, Japan, India, Australia and South Korea. Among them, China is leading the market with more than half of the share in 2022. Companies like Tencent and Singtel are financially involved in developing such eSports spaces and even have teams of their own.

The report further categorises various device types including mobile, PC, gaming device and others. Among them, the mobile segment is dominating the market with highest market share in the analytical year. Asia is home to almost 1.5 Billion gamers. Among them, 55%  are gamers and 52% of gamers subscribe to at least one gaming service. As per the obtained data, nearly 442.5 Million population is encountered to be a live streaming audience. Also, close to 160 Million gamers are eSports enthusiasts. Livestream platforms for eSports in Asia-Pacific include Facebook Gaming, Twitch, Afreeca TV, Bili bili, Nimo TV, YouTube, Booyah, Kakao, Penrec.tv, Loco, Dohyo, Huya and Garena.

‍Some Major Sponsor Industries in Asia-Pacific: Gaming industry has also attracted a lot of popular sponsors from cross-functional sectors such as Athletic & Sportswear (Puma, Adidas), Food & Beverages (Red Bull, Harbin Brewery, KFC), Oil & Gas (ExxonMobil), Mobile Phones & Tablets (Samsung, OPPO, One Plus,Asus), Automotive Manufacturer (Mercedes-Benz, BMW), Gaming Hardware & Peripherals (Razer, Logitech), Computer Hardware (Intel, Lenovo), Bank (Hana Bank, Ping An Bank)

‍A Few eSport Start-ups in Asia-Pacific: Rise in the Gaming industry has also given rise to many startups such as WAKAW.LIVE, EssentiallySports, esportsXO, Joyride Games, Xasy, Techno xo, Klutchh, EMSpyre Enterprise, EJN, EVOS Esports, EMERGE Esports, Golive Games Studios, Leet9 and GoodGame Nation. These are some of the Top eSports Startups in Asia.

‍Some Major Companies present in the market are Krafton, Tencent, Activision Blizzard Inc, Intel Corporation, NVIDIA Corporation, Electronic Arts Inc, Wargaming Public, Rovio Entertainment, Alphabet Inc. (YouTube), Twitch Interactive, Inc., Facebook, Inc, Beyond The Summit, Riot Games, Inc, Sony Group Corporation, HTC Corporation, Gfinity plc, Nintendo, Loco (Stoughton Street Tech Labs Limited).

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Consolidation in the Gaming industry:

Gaming industry saw 1320 announced and/or closed deals for M&A as well as investments, with deal values hitting $127 billion in 2022.

There were 324 acquisitions in the year, 58 public market deals, and 938 private investments. By comparison, there were 295 acquisitions and 723 private investments in 2021. The biggest deals for the year were the acquisition of Activision by Microsoft ($68.7 billion), Zynga by Take-Two, IronSource by Unity, Bungie by Sony, and financing for Epic Games.

Though there was a significant decline in the Q3, Q4 of 2022 in terms of funding/investments, this year will likely see the gaming sector continuing the last year trend. Although this will likely depend on how this year will continue, with the recession, how strong it is going to be and hopefully we will see the public market recovering in the second half of 2023.

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The main underlying factors for Gaming sector consolidation:

• Growth of the gaming market:  The gaming market is growing rapidly, and this growth is creating opportunities for consolidation. As the market grows, it becomes more difficult for smaller companies to compete with the larger, more established players. This is leading to a trend of smaller companies being acquired by larger companies.
• Rise of new platforms:  The gaming industry is undergoing a period of rapid technological change, with the rise of new platforms such as cloud gaming and the metaverse. These new platforms are creating new opportunities for consolidation, as companies look to acquire the expertise and assets needed to compete in these new markets.
• Need for scale:  The gaming industry is becoming increasingly capital-intensive. The development of AAA games can cost hundreds of millions of dollars, and this is driving a need for scale. Larger companies have the resources to invest in the development of these high-cost games, while smaller companies are struggling to keep up.
• Need for talent:  The gaming industry is facing a shortage of talent. As the industry grows, it is becoming more difficult to find qualified developers, artists, and other professionals. This is leading to a trend of companies acquiring other companies in order to acquire their talent.
• Studio acquisitions are a great way to secure content for subscription services. Owning original content has long been proven to be a smart and sustainable business decision, and both EA and Microsoft have clearly embraced that lesson.

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M&A outlook in the Industry:

There are two things we need to keep in mind before discussing this further, i.e. a) Creating any AAA titles cost millions of dollars, and, b) In this fast paced sector one can’t stop and start any new thing from scratch.

To help with the example, we all know about multiple open world games, and one such name is ElderScrolls of Bethesda Software, a very popular game with a huge database of around 5 million active players but still couldn’t keep up with the newly launched game Elden Rings by a giant gaming studio FromSoftware. Even though Bethesda was a well established player, it still couldn’t keep up with the new player profiles and resources and eventually was acquired by Microsoft.

Microsoft’s journey is interesting in itself. Even with such a technology prowess and the inventor or XBox, Microsoft couldn’t set its foot in the gaming industry. It is only when Microsoft acquired Activision Blizzard and Bethesda, that it was able to compete healthily with the other giants like Riot, Sony etc.

M&As can play a huge role in unlocking growth potential. By consolidating the industry, bringing together complementary companies, and expanding the reach of the community, M&As can help to create a more vibrant and dynamic gaming ecosystem. By giving esports companies access to new technology, expertise, and reach, M&As is making eSports more accessible to fans around the world.

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Impact of M&A on eSports:

eSports, or competitive video gaming, is another rapidly growing segment of the gaming industry. In 2022, the global eSports market was worth an estimated $1.1 billion, and it is expected to reach $1.62 billion by 2025. There have been multiple recent eSports acquisitions that have catapulted growth for the buyside company.

In 2021, Sony Interactive Entertainment acquired Repeat.gg, a leading eSports tournament organiser. This acquisition gave Sony access to Repeat.gg's technology and expertise in organising and broadcasting eSports tournaments. M&As can also help eSports companies to expand their reach and to attract new fans. 

In 2022, ESL Gaming, a leading eSports tournament organiser, acquired FaceIt, another leading eSports tournament organiser. This acquisition gave ESL Gaming access to FaceIt's user base of over 15 million gamers.

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How to find the right gaming targets or assets?

The hottest market for M&A and financing in the gaming industry would mostly be in gaming AI tools, AR and VR. All thanks to MetaVerse. In most cases, organisations try to achieve their inorganic growth strategies through one of the following modes. But each comes with its own limitations and specific sweet spots.

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• Investment bankers - Often bring irrelevant sell side mandates, limited network, expensive, not interested in small to midsize transactions. Most IBs also do not have enough reach in the Gaming industry since they mostly rely on networking,
• Online databases - Inaccurate information, key financial details missing (like revenue, EBITDA), outdated details. In some cases, it lacks information of specific KPIs to look for in niche technologies. Most of these databases also lack gaming companies on their portals,
• Inhouse Corporate Development Teams - Limited bandwidth with efforts wasted in qualifying targets that do not want to get acquired or are unaware if there’s an upcoming target outside their network,

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