Research Summary
The report discusses the transformation of Enad Global 7 (EG7), a $150M-sized games business based in Stockholm, Sweden. The company, which was initially a co-development studio, has now become a roll-up vehicle. Despite facing challenges, the new management has managed to rationalize the business, leading to a healthier foundation. EG7 operates in publishing, distribution, work-for-hire, and marketing, with six business units including Daybreak, Big Blue Bubble, Fireshine, Petrol, Piranha, and Toadman. The company is now focusing on a new growth phase.
Key Takeaways
EG7’s Business Rationalization and Growth
- Business Rationalization: EG7 underwent a significant transformation under the new management led by CEO Ji Ham. The company conducted two divestitures, shut down high-risk projects, wrote off risky intangible assets, and paid down its debt. This rationalization led to a healthier foundation with more revenue, profits, and cash.
- Revenue Generation: Two of EG7’s business units, Daybreak and Big Blue Bubble, generated 68% of the company’s revenue and 95% of adjusted EBITDA over the past year. The company has returned to growth, with 20% revenue growth this year following 27% growth last year.
- Future Growth Plans: EG7 plans to optimize its current portfolio for cash flow while selectively investing in new opportunities with promising economics. The growth will largely stem from new third and first-party games. The company is also focusing on turning around the services businesses.
- Third-Party Publishing Efforts: EG7 is targeting franchise opportunities with potential for sequels every two to three years. An example of this is a partnership with developer Cold Iron for a new Aliens game. The company’s investment of $23M in this project is expected to achieve a high internal rate of return.
- First-Party Efforts: EG7 is also focusing on its leading IPs, including My Singing Monsters, Everquest, H1Z1, and Planetside. The company has plans for a new H1Z1 launch in 2026 and something new related to Everquest in 2028.
Actionable Insights
- Understanding the Market: EG7’s transformation and growth provide insights into the gaming market and the potential of roll-up strategies. It’s crucial to understand the market dynamics and the strategies employed by companies to achieve growth.
- Exploring New Opportunities: EG7’s focus on third-party publishing efforts and first-party efforts highlights the importance of exploring new opportunities and diversifying the portfolio. Companies should consider similar strategies to drive growth.
- Long-Term Planning: EG7’s long-term plans for its leading IPs underline the importance of long-term planning in the gaming industry. Companies should consider long-term strategies to ensure sustainable growth.
- Financial Health: EG7’s financial health, as indicated by its revenue growth and EBITDA margins, emphasizes the importance of maintaining financial health for a company’s growth and sustainability.
