Research Summary
The report discusses the acquisition of Singularity 6 by Daybreak Games, a subsidiary of Enad Global 7 (EG7). It provides an overview of the companies involved, the financial aspects of the deal, and the strategic implications for both parties. The report also highlights the performance of Singularity 6’s game, Palia, and the future direction of EG7.
Key Takeaways
Acquisition of Singularity 6 by Daybreak Games
- Deal Details: Daybreak Games, a subsidiary of EG7, is acquiring Singularity 6. The price of the deal remains confidential, but it is funded through EG7’s available cash balance, which was $44M at the end of Q1.
- Company Profiles: Daybreak Games is known for operating middle-market MMORPGs, while Singularity 6 is recognized for its life simulation game, Palia. Singularity 6 was founded in 2018 and had raised $49M in funding from various backers.
Performance of Palia
- Game Popularity: Palia, Singularity 6’s first and only release, had 3M downloads before its full Steam launch. Using a download-to-review ratio, it is estimated that the game had an additional 550K to 1.1M Steam downloads.
- Revenue and Monetization: The revenue from Palia is difficult to assess due to the lack of reliable public sources. The game’s monetization is limited to a cosmetics-only cash shop.
Strategic Implications of the Acquisition
- Benefits for Singularity 6: Partnering with Daybreak could provide Singularity 6 with the necessary capital and competencies to help Palia succeed, including know-how in monetization and live ops.
- Benefits for Daybreak and EG7: The acquisition aligns with Daybreak’s strategy of owning and operating MMOs. For EG7, the focus seems to be shifting toward live service PC/console games rather than mobile.
State of M&A in the Gaming Industry
- M&A Activity: Roll-up entities such as EG7, Embracer, and Stillfront have essentially frozen their acquisition activities. This deal does not signal a resurgence of M&A activity, but rather an opportunistic move by Daybreak.
Actionable Insights
- Monitor the Performance of Palia: Given the significant investment in Singularity 6 and the strategic importance of Palia, it would be prudent to monitor the game’s performance and user engagement levels.
- Assess the Impact of the Acquisition on EG7’s Strategy: The acquisition could signal a shift in EG7’s focus toward live service PC/console games. This could have implications for the company’s future acquisitions and investments.
- Understand the M&A Landscape in the Gaming Industry: The acquisition provides insights into the current state of M&A in the gaming industry. It could be beneficial to understand the factors driving these deals and the potential opportunities they present.
