Keywords Studios - Another electrifying M&A deal
Keywords has announced its largest deal of the year so far, the acquisition of High Voltage Software (HVS), a US-based, full-service, work-for-hire, AAA games developer for up to US$50m, payable two-thirds up front, with one-third after 12 months subject to performance conditions. Keywords will make an initial payment of US$33.5m, with US$23.75m in cash. The total consideration represents 5.6x HVS FY21e EBITDA (c US$9m), within Keywords’ target range of 5–7x EBITDA. HVS is Keywords’ fifth deal of the year, the third in games development and its third US-based deal. We suspect Keywords was attracted by HVS’s close relationship with Epic Games, publisher of Fortnite. We have left our FY20 estimates unchanged, but the deal is 8% EPS enhancing based on our revised FY21 estimates.Keywords Studios is a technical services provider to the video games industry. Co.'s segments include: Localization Services, which relate to translation and cultural adaptation of in-game text and audio scripts; Localization Testing, which includes testing of linguistic correctness and cultural acceptability of computer games; Audio/Voiceover Services, which relate to audio production process for computer games; Functional Testing, which relates to quality assurance services provided to game producers; Art Creation Services, which relate to the production of graphical art assets for inclusion in the video game; and Customer Support, which relates to the live operations support services.
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