Bigger AND More Creative Building a better developer
Bigger AND More Creative Building a better developer through M&A Presented by Jon Goldman CEO
Does Bigger = More Creative? It Can! (but not necessarily)
HYPOTHESIS: a couple shapes for the future Small Craftshop > Big and Broad > Ixnay Big and Specialized > Too many viable platforms > No portfolio benefit/hedge >
FOUNDATION 9 big and broad More than 300 shipped titles > More than 350 employees > All platforms, age groups and genres > Multi-media approach >
FOUNDATION 9 timeline of consolidation > 2003 > > Digital Eclipse and Imagin. Engine merge to form Backbone Entertainment 2005 > > > Backbone Entertainment and The Collective merge to form Foundation 9 Entertainment Foundation 9 acquires Pipeworks Software Foundation 9 makes investment in Circle of Confusion
MARKET FORCES trends and consequences Publisher consolidation > Platform proliferation > Compressed hardware cycles > Increased complexity and cost >
M&A pros Acceleration of strategy > Practical benefits of size and scale > Risk mitigation > Financial strength > Infrastructure expansion > > Stability for employees and recruits
M&A cons Control > Valuation > Corporate culture risks >
DEFINING CREATIVITY for business Quantify > Evaluate > Harvest/Discard > Partner >
MANAGING CREATIVITY in larger organizations Budget > Set success criteria > Commercial market sensitivity >
FOUNDATION 9 our experience > Before: > After: And more to come
END GOALS possibilities Lifestyle business > Cash cow > Exit through sale or IPO >
RECRUITMENT/RETENTION getting and keeping the best candidates Balance stability, passion, risk > Believable upside with checkpoints > Opportunities for career growth >
M&A cons redux Runway, NOT control > Scale => investment => creative output => valuation growth > > > Examples: Pixar, Marvel Don’t assume your culture can’t evolve
QUANTIFY, QUANTIFY examples Craftshop - $5 M/yr – low profitability > Bodyshop - $20 M/yr – variable profitability > Bigpantshop – variable revenue, high profitability, original IP >
THE ENDGAME playing out the possibilities Trade sale is NOT the only answer > Franchise value outweighs dilution in M&A > Size matters > Multiples in financial transactions matter even more! >
CONCLUSIONS take-aways Consolidation is a natural response to maturing market > M&A is a tool for increased investment in creative output > Don’t assume, quantify > Accelerate, don’t stagnate >
SURPRISE, CREATIVITY ADDS VALUE Increases your enterprise value > Increases specialization along value chain > Specialization expands overall market > “Runway” – Don’t run away! >
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