Take-Two’s second coming 

Contact: Scott Denne

After nearly a decade on the sidelines, Take-Two Interactive has returned to the M&A game. Back then, the birth of the smartphone and explosion of low-cost mobile gaming loomed over developers of pricey console games. But now that the shift to digital is delivering expansion, not irrelevance, Take-Two and its peers are printing more acquisitions that align with that trend.

Take-Two’s latest move, the pickup of space simulation game Kerbal Space Program from developer Squad, marks its second purchase of the year, following its $250m reach for Social Point in February. Prior to those deals, Take-Two hadn’t bought anything since early 2008. Both recent transactions have brought on digital assets – Kerbal sells through PC downloads, while Social Point makes mobile games. (Unlike Social Point, Kerbal’s price tag wasn’t disclosed, suggesting it was the smaller of the two deals.) And they follow a 52% jump in Take-Two’s annual revenue to $572m and 55% increase in bookings from digital sales.

Other companies with a history of making games for the PlayStation and other consoles have adjusted their M&A strategies. Ubisoft, also experiencing growth amid greater digital revenue, has printed two gaming purchases this year as well, putting it on pace for its most acquisitive year since 2013. Warner Brothers Entertainment also ended a drought of its own – almost seven years since its last videogame acquisition – when it bought mobile developer Playdemic in February.

Greater digital sales provide gaming vendors with more predictability in sales, lower costs of revenue and a buffer against seasonality, in addition to revenue growth. Market disruptions, such as shifting sales channels and business models, are most often associated with opportunities for startups. But the experience of Take-Two and its rivals shows that startups aren’t the only companies that can win that game.

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