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Sweden’s Embracer Group added more than 200 game developers as it acquired three more game studios today.
Embracer’s Saber Interactive has acquired Demiurge Studios in the U.S. as well as Fractured Byte and SmartPhone Labs (SPL) in Eastern Europe. The prices were not disclosed.
The continuation of Embracer’s unprecedented acquisitions of game studios is happening amid a global boom in game playing, game investments, and a shortage of gaming talent. This move also boosts Embracer’s support services (such as porting and testing), either for its other studios or on work-for-hire projects. An estimated $50 billion to $60 billion went into new game investments, acquisitions, and public offerings in the first half of 2021, about four times for the same period the year before.
Embracer Group has raised more than $2 billion in credit facilities and new share issues in 2021. That money is fueling its acquisitions.
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M&A advisory firm Quantum Tech Partners said that Embracer is the top game company acquirer so far this year, with 10 acquisitions so far in 2021.
Demiurge Studios
Above: Phoenix from Marvel Puzzle Quest.
Embracer’s Saber Interactive has acquired all of Demiurge Studios in Cambridge, Massachusetts, which is run by CEO Kurt Reiner. The team has 68 employees. Albert Reed, Chris Linder, and Tom Lin started the studio in 2002.
After a shift in strategy in 2008 to focus on free-to-play mobile, Sega’s mobile division bought Demiurge in 2015, and then Albert Reed re-acquired it in a management buyout in 2020. The original founders are still involved in Demiurge today.
Demiurge Studios has been involved in many co-development projects and contributed to over two dozen titles. Four are original mobile free-to-play titles: Crazy Taxi Gazillionaire, Sega Heroes, Puzzle and Glory, and Marvel Puzzle Quest.
The studio develops games cross-platform and is now focusing primarily on the triple-A segment. It has worked with leading international developers and publishers such as THQ, Gearbox, Electronic Arts, Ubisoft, Sega, and Epic Games on titles such as Titan Quest, Borderlands, Brothers-in-Arms, Mass Effect, Medal of Honor: Airborne, and Rocket League: Sideswipe.
During 2021, Embracer expects that Demiurge will generate $15 million in revenues. The studio is profitable and has a pipeline to accelerate growth and grow the team above 350 employees during the next five years. The acquisition will bolster Embracer’s work-for-hire capabilities. The acquisition includes an upfront payment and a five-year earnout based on hitting goals. The deal should close this month.
Ernst & Young is providing transaction support and Baker McKenzie is acting as legal counsel to Embracer. Juno Capital Partners is acting as financial adviser and Fenwick & West is acting as legal counsel to Demiurge in the transaction.
Fractured Byte
Above: Fractured Byte is based in Estonia.
Saber is also buying all of Fractured Byte, a studio with headquarters in Estonia and a team of 50 developers in three locations in Ukraine.
The company creates indie games and handles porting of games to new platforms. It adds more work-for-hire capabilities to Embracer.
Founded in 2018, Fractured Byte is an independent studio with headquarters located in Tallin, Estonia, and with development operations across three locations in Ukraine.
The studio worked on titles such as Borderlands: The Legendary Collection and Tony Hawk’s Pro Skater 1 and 2 for the Nintendo Switch. Fractured Byte is led by one of its cofounders, who will remain as CEO.
The purchase price contains an upfront part and a six-year potential earn-out and consists of a mix of cash and newly issued Embracer B shares. The deal is expected to close in September.
Ernst & Young is providing transaction support and Baker McKenzie and Cobalt are acting as legal counsel to Embracer in the transaction.
SmartPhone Labs
And Saber is also buying SmartPhone Labs, a Russian independent software testing and games development company for mobile, PC, consoles, and VR.
SPL was started in 2002 as an independent software testing and game development company. It is still led by cofounder Artem Kharitonov. The studio has more than 100 employees.
It makes games on multiple platforms including PC, PlayStation, Xbox, Switch, mobile, and VR.
The devs focus on modern production and testing practices and have experience working with Unity, custom C++ engines, VR, and backend systems. SPL has a long-standing developer relationship with Saber, having collaborated on many successful projects, such as bringing Mudrunner to mobile and World War Z to Switch, in addition to several work-for-hire projects.
The purchase price contains an upfront part and a one-year potential earn-out, both paid only in cash. Ernst & Young is providing transaction support and Baker McKenzie is acting as legal counsel to Embracer in the transaction.
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