Is Gaming in an AI Bubble? What the Deal Data Says

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Welcome to the Navic Gaming Podcast. I'm

your host, Kaylee Moore. If you've spent any time trying to understand the gaming mergers and acquisition market, you've probably come across Drake's quarterly reports. They're one of the most closely read data products in the industry, tracking deal activity, financing rounds, public market performance, and the macro forces shaping who is buying, who is selling, and why. Today's guest is the person behind a lot of that analysis and behind more than 25 years of deal investments. Michael Mezer is the managing partner at Drake, a global tech investment bank with about 100 professionals across US, Europe, and Asia. Michael leads the firm's gaming and digital media practice and has advised on some of the most impactful transactions of the last two decades. Most recent deals include the sale of Track Racer to Corsair, Hipster Whale to Atari, Ready Player Me to Netflix, and Extra Games to Zingga. Each of those deals tells a story about a very different phase of the industry's

evolution and one that landed under very different market conditions. Drake's Q2 2026 report landed a few months ago and the headline is surprising. Q2 was the strongest quarter for financing in the last 12 months with over 2.5 billion invested led by gaming AI adtech and hardware. M&A stayed healthy with 51 deals. And in the private market, General Intuition, which uses gaming footage to train AI for physical robotics, has gone from a 2.3 billion valuation reported to 6 billion in the space of just a couple of months. In a market where AI is being layered on to everything, where private equity has reshaped the buyer landscape, and where the headlines can be spectacular, but also for game studios, fundraising, it remains harder than ever. what is actually real. Today, we're going to talk about what the data shows, which categories are attracting serious capital, and where the current

excitement around AI valuations might be getting ahead of itself. Well, Michael, thank you so much for being here. Welcome to the podcast. I want to start with your background because you came to gaming through an unusual route. You have a masters in engineering and you had engineering roles at AT&T, IBN, MindSpeed. That's followed by product management, corp dev roles, then investment banking before focusing on digital media and gaming. What made you lean into gaming specifically?
Well, so first I like games. Um, but then this is nowadays like over 15 years ago, I was um starting with a partner in investment bank. Um, and we were based in LA or still based in I'm still based in LA and just looked at um, if you work in a boutique bank, you need to really focus on some subsectors otherwise um, you might work on a deal nobody else wants. And we um, we had some gaming

deals before and we thought what's a good sector that has a lot of growth potential we should focus on and we picked gaming. I mean, Activision um is is in LA or was is is in LA and Scooby was growing and emerging and a lot of the um Japanese companies or Asian companies have their like US headquarter in LA. So, and then uh yeah, one deal led to the next and um been now doing I think over 30 gaming deals. So, it's been a a fun ride. And you've been doing this for a number of years. You've um been through every major industry cycle, I would say. When you look at the current moment, what are your thoughts? Are we in an AI bubble?
Um AI bubble is is is interesting. So there's obviously a lot of money flowing into AI, but I believe that AI will

fundamentally change how consumers interact, how um companies are run, how new products are developed. So um I I think um if you look at the broad landscape
um some of the companies where a lot of money is flowing in today going to be the winners and it's going to be very very large businesses.
Yeah. um like at any time when there's a lot of innovation and happening I mean I think a good amount of companies that are raising big rounds now probably not going to make it and they're going to go under.
So um I think all the money flowing in is a reflection of the massive opportunity that's ahead of us. And some of those valuations might be, you know, anticipating that a specific company going to be a winner and they may be, but um, you know, not all of

them will be.
Yeah. And where do you see that kind of manifest within the games industry specifically?
Well, there's a couple of things. Currently, we're in the phase where um AI is helping with making game production faster, lower cost. That's probably kind of the first phase and different
different countries and regions are endorsing that in different ways. The Chinese are really leaning in.
Um some of the western companies are more cautious. Um also maybe for some IP or copyright potential risks. Um but what I'm excited about is kind of the next phase where there might be new AIdriven games where
I mean we from my point of view we have not seen an enormous amount of innovation the last few years. If you look at, you know, once um the games launch in mobile with the app store, there was like a

huge wave of new innovation, new games, but the last few years um while there's always really cool new games coming out,
overall there hasn't been a ton, there hasn't been a lot of really new categories.
And um what I'm excited about is this new categories of AIdriven games where you um [clears throat] interact in certain ways. I just uh read about a game where you're like a detective investigator and you actually talk to different people and they build in some LM models for that. So,
is it Scryptic or is it a different uh company?
Might be Scryptic. Yeah.
Yeah. I I spoke to them on the Navic podcast a couple months ago and I thought they were one one company that was doing AI in a such a unique way because they're the gamers actually loved it. like they weren't using AI to create gameplay, but they were using AI to like further their gameplay to create these experiences. So, you didn't get the blowback that we see in in other

genres or how other people are using AI where it just looks like sloppy AI slop, especially on the graphics, which we know gamers have some major major issues with.
Yeah. So, I think this is an amazing opportunity and I hope in two, three, four years there's going to be some really new categories with games that are highly successful that are just very different to the current games.
Mhm. All right. I'm going to take us on a time travel now. I think you and I actually met for the first time briefly eight or nine years ago when esports was the next hot thing. I was with Bitcraft Ventures. I was working with a lot of esports teams. You know, esports was supposed to be big business for for gaming, for brands, and that didn't really pan out. But was interesting when you were and I were talking about this episode. You mentioned you went to the esports world cup last weekend. For our listeners, this episode is actually going to come out in September, so we'll say last month. I would love to hear

your thoughts on that event and also your thoughts on is esports coming back.
Yeah, so the um um I think the esports world cup the first one was two years ago and I uh went to Riat and it was actually quite impressive and um I mean the Saudis clearly have been a massive supporter of it.
Yes. Um so so the World Cup um move from from Riat to Paris mainly due to the Iran war. Um and
um I think they had like 24 games, 200 clubs competing. Um prize money this year was 75 million.
Wow.
So that's um in the esports team ecosystem. That's a good amount of money and uh it really helps a lot of the teams. Um and um yeah, so I think they did a a fantastic job. It's Paris has so

many beautiful locations. Um I think they also had like 850 million views of it. I uh watched the Counter Strike final which was fun. And then um the ceremony was at the the co-op pale in in in Paris and um Ronald Cristiano Ronaldo brought out the trophy and um uh Emmanuel Mako um G gave it to the AGL the winning team and uh a lot of really uh key leaders in the industry participated. So I personally really enjoyed it. I think it was done great. Um the esports ecosystem in general um it's a mix. It's massive amount of viewership. People are passionate about it. Like 850 million views just for that um for the esports world cup is quite impressive.
The challenge is still the monetization.
Yes.
And um I personally think esports will

continue to grow and will be successful. It might take a long period of time.
It's also people who like play games, watch games, and so on. As um younger people get a little bit older, the audience gets larger, the the amount of money they're willing and happy to spend on it um is increasing, but it's probably going to take probably going to take a while. Yeah.
And what do you think the future of monetization specifically for teams looks like? Obviously, we saw a lot of the leagues, Overwatch League didn't work out at all. Um, brand deals, I think, still is probably one of the biggest revenue drivers, but I can't imagine that there are most brands that are expending in esports like they were 8 to 10 years ago. What do you think the next generation of monetization for esports teams looks like?
I mean, I think brands is probably still a big one potentially. If you look at traditional sports, media rights is the

biggest one. Yeah, it's always been tricky though because of the game publishers, right?
It is. It is more tricky um for sure. And
I don't know, maybe other stuff like gifting uh could become more meaningful. Um
but probably will be brand driven just monetizing the enormous amount of views better. Um
and yeah, but it's not going to be easy.
Have you seen any interest? And I know you're doing mergers and acquisitions, so you aren't necessarily like venture capital where you see early stage uh companies, but have you seen any companies or deals related to AI in esports at all?
Nothing really comes to mind. No.
Yeah, I I haven't either. Just uh off the top of my head, I just surprised, but I'm also not in deal flow meetings as much anymore. So, let's see. Okay, I want to move on a little bit. So, Drake publishes some of the most widely cited market data in gaming every quarter. And I was very surprised by your Q2 report.

Q2 was actually the strongest quarter for financing in 12 months. But when you look at where that capital actually went, it's gaming, AI, adte, hardware, where does that tell you about where institutional confidence is right now and where is it not?
Yeah. So I think uh Q2 had disclosed about two and a half billion. The actual number was much much larger and I can talk about that in a second. the number of deals just dipped below 100. So
looking at the big picture, uh 2 three years ago we were at like 200 financing rounds a quarter. Now we're slightly below 100. And that's maybe the overall trend um that less money is flowing into it. There's less rounds. And
it shifted a little bit from a lot of money going into content and studios, both PC and mobile. Um what we've seen now is um um like last quarter more like

I would get would say this gaming infrastructure and tools like applyier on the um on the ad side
um general intuition was a big one on the AI side um
but also a good amount of uh hardware stuff with um M Retro uh Palmer's Lucky uh gaming peripheral company I think raised over 100 million and Q1 also um like new platforms specifically kind of those AR AI AR glasses.
Yeah.
Uh with Ray Neo or XR raising a lot of money and that's what people look at. It's probably also going to take some time but thinking about major next platforms. So, there was the phones, um, games on the phones, then there's
watch, which, uh, probably has been less utilized for games cuz it's more more difficult. But there's going to be a lot of um really cool AR glasses going to

market this year with like a display in it and you see it and and um just from an innovation point of view, it's going to be I mean good amount of people believe that's going to be the next platform where you might not even need your iPhone or your phone for whatever you're doing. You you see what's going on in the environment. You can control it. You can um talk. You can listen to stuff. So also a good amount of money um went into that in Q1.
Um
the biggest deal in Q2 was was not announced. The deal value was um chess.com. CVC um led that route was very large and um it just leveraging kind of a you know just being so um you know such an old game but also moving into digital and training people and everything
um they continue to do really well and that was

probably the largest round which was not included in the two and a half billion. Oh, okay. It's I I love I think even for myself, even though I've been in the games industry, it's so easy to forget that like the chess games or you know, the New York Times does so well with their games. I play them every single day, but I still don't in my mind think of that as gaming, even though it is and it grabs my attention. And I feel for most of the people I know, especially in my demographic, they don't necessarily consider themselves gamers, but they're constantly playing those games. So that's a a good reminder. I want to talk about, you know, one of the things that you mentioned in the report is, of course, there are some mayor's deals that weren't necessarily announced, uh, financial, the financial figures like chess.com, but a lot of the deals were smaller and midsize. And I want to talk about what's driving the absence of like the large strategic acquisitions that we saw in 2021, 2022. Obviously, very different market time.

Um and do you think that's going to change in the later half of this year in 2026?
So looking back it's maybe surprising that 2122 co era um everybody a lot of people stayed at home
y
plenty of time to play games that um a lot of investors did not anticipate that it's not going to stay like that forever.
Mhm. So, um, while it was very frothy during that period of time, it then crashed on pretty hard. Um, I would say the last year or two, we've been like in a steady growth mode.
If you look at um, so, so in M&A, there's two ways to look at it. One is that deal value. Those are mainly driven by the really big deals where the value is um, disclosed. A lot of the midsize deals, the details are not even disclosed. So that's can't really use that. But um if you just uh look at the

number of deals like in Q2 24 we were at 37 M&A deals that quarter.
Um
Q2 we were at 50.
Yeah.
So we see a steady increase. A lot of um midsize deals. Um a lot of buyers in general who have been very cautious the last few years are leaning in, starting to make offers again. So, I think there's more and more excitement coming. And if I had to guess this, it's going to be kind of a a gradual uh increase over the next year or two um with a lot of um smaller deals. If you look at the
the big deals, so they were mainly driven by by PF really.
Yeah,
it's EA just closed a few weeks ago. That obviously was massive. Scopi several um years back and Scopi um bought the the PixelFlow guys. Niantic um PF bought um or PF/Savvy

bought Monton which I don't think has closed yet but it's
um also very large. So if you look at the buyers universe it is uh P by far the largest. Yeah.
Um we saw um the Chinese who were very active a few years ago. Tencent was super active. Netty's there was Biden's I mean NI totally scaled back. They're even looking at divesting a lot of the remaining assets they have. Um Biden's wanted to get totally out of gaming then change their mind again. So they're now in the sector again. Also they sold Monton which obviously was um the large large asset. Um and Tensson is still pretty cautious I would say. Um we've seen a lot of the Koreans leaning in and looking to expand into the western markets uh which is pretty exciting. Um but we've also seen a lot of activity on the private equity side. Yeah.

Like CVC has been super active. They acquired Jagex now chess. They did uh Dream Games which was also I think at like a five billion valuation or something around that.
Uh EQT has been pretty active. They acquired Keywords. Um
um TBG just bought Playstack last quarter. Um a little you know ballpark a little bit smaller than the others but um lots of activity by the private equity funds.
Yes. So, those are the people who are buying in the big deals, but you mentioned that you think there's going to be an uptick in the midsize deals. Who are the acquirers in that arena? Is it still the major players that you just spoke of, or is it a different buying audience?
It's a mix. I think the the Koreans are still very active. NCoft has been um expanding significantly kind of in the mobile space, which was a new category for them. Crafting continues to be very active. Um, and I mean we just um sold a

company Hipster Whale known for Crossy Road to Atari. Atari has done h [sighs] I think like four or five mainly smaller deals. Uh, Hipster Whales I would say was midsized um over the last year and I expect them to do more. Um, and yeah, then also kind of several funds. Some of them have maybe family offices backing and so on. And they're doing a little bit of a of a rollup.
Yeah.
Uh or maybe rollup is not the right word anymore. Um kind of selective acquisitions.
Um
Yeah. And the big ones like um Take 2 is still looking at deals. EA will we'll see what happens. That's a deal just closed. Um um so I think the universe is changing a little bit.
Yeah.
And um the new players like ever play

former team 17 they're active and so it's a good mix.
Mhm.
Um for I would say the midsize deals.
Okay. I want to go back to AI. We already established at the top that you're a believer in it, but you mentioned also General Intuition's round, and I've been dying to talk to people about this at Gamescom. So, General Intuition just raised at what is reported to be a 6 billion valuation, but I don't think that's been confirmed yet. And it uses gameplay footage from Metal TV uh to train AI for physical robots, which puts it somewhere between gaming infrastructure and AI frontier lab. What do you think of that valuation? Do you think that's valid?
I mean, if you look at physical and AI and robotics,
Mhm.
Uh it potentially or it most likely will be massive. Mhm.
Just the question is, I mean, with the Optimus robots and and all the Chinese

models coming out, I think in 5 years out, it's going to be a massive market.
Um, and then the question is what's valuable to train them to make them as as good as possible. And
um I I don't know what the valuation was. uh 6 billion for sure is is not small and I'm not sure what their revenues are but um I mean it's similar what I mentioned be before it's going to be a very very large markets
and some of the companies going to be winners and I if if general intuition will be a winner then they might be worth 25 billion 50 billion or more
um and that's just people probably believing in the team and what they've done so are and uh obviously the massive amount of content and um how people react in those situations in the game.

If if if they're going to be a winner, then it's probably was a good round.
Yeah. [laughter]
Okay. So, we we've talked a lot and we we have touched on game studios, right? But I would say less at Gamescom this year. But at GDC, a lot of the conversations I had were with game studios who had raised in, you know, 2021, 2022, maybe it was the $10 million round, 15 million, just enough to finish a game, but not enough to really take it to that next level. And those studios, it seems like it's impossible to raise for them right now. Like, what is this? How do how do you think the funding landscape is changing for game studios and what does it mean for how founders should be positioning their companies right now in order to raise?
Yeah, I mean first I would distinguish between kind of mobile and PC games slightly different segments. Um I think the mobile landscape
um got much more difficult
and I think it's continue to get more

difficult.
Absolutely. Um if you look at the western the top hund charts number of new entrance from China I mean almost all of the new games are coming from China and they're very successful in the western markets and new entrance from western studios very few Turkey obviously is still one of the highlights and um you know grand games just raised a nice round out of um
out of Turkey but um it's very difficult and then it depends on the phase where the studio is. what became now super uh popular um which started by with with General Catalyst is this U-wave
uh financing with essentially some kind of a debt structure. You fund certain cohorts and if a company is you know somewhat established the game has an audience it's monetizing but they're trying to scale and in the end

they need to scale to be really successful over time. I think that's probably um a good and easy and non-dilutive way to look at it.
Yeah.
Um on on the PC side, there are a bunch of new kind of indie double AA um funds that just launched. I think V Game has one, Griffin Gaming has one.
Um but in general, you know, it is difficult.
Yeah. Um so companies maybe should look at publishing deals um to help them you know to get the game out and you know which which is a big challenge too. Yeah.
Um
also I mean looking at the venturebacked ecosystem there has been several really good successes on mobile like Dream Games is one. um Super Play had a great deal with Playa
at the time and and several others. If

you look at the PC space, um a lot of the companies that are very successful or sold were not the last few years were not necessarily venturebacked.
So, they were bootstrapped and they're growing and they're doing well. Um,
it's the dream.
And that's also a little bit why funding kind of in those PC console studios
from VCs just, you know, much more selective.
Yeah.
Because there just hasn't been a ton of really
breakout hits.
Um,
I think it's almost impossible to predict too, right? Just because there was a team who built amazing games at Riot or Blizzard doesn't mean that that the next game is going to succeed.
Yeah. And creating new IP is just incredibly difficult.
And um yeah,
that was 2122 when everybody thought everything's just keeps on going up forever.
Yeah.

Um but reality just, you know, it's much more difficult. One of the things I'm really interested in is how gaming is maybe overlapping but or adjacent with other kind of forms of entertainment and you did a deal I think it was last year you advised on the sale of Ready Player Meet and Netflix. So it's Netflix acquiring an avatar tech company that was really gaming focused right with the gaming avatars as far as I remember. Um I I I want to talk a little bit about that of like where are you seeing kind of the crossover between general entertainment and gaming? Is there any space you're really excited about? Like one of the things that I've been thinking about a lot is the vertical shorts like the micro dramas, right? There's obviously a lot of gaming components or gamification components to get that stickiness, but I'd love to hear your thoughts on that too. Yeah. So, Ready Player and Me, they were heavily [clears throat] in games, but avatars were also used outside of games.

And um
the deal was sponsored by Netflix Games. So, games is um a key priority within Netflix. And the driver behind it I believe was giving the users a personal identity with this avatar which will launch at some point
in the future and making it just more social. Um and then who knows maybe it's going to get into other parts. Um Netflix has a bunch of gaming studios. They acquired several them few quite quite a few years ago. Um but yeah, the the Ready Player Me team and and I think it was a fantastic fit.
Yeah.
Um Micro Traumas. Yeah. I mean, it's one of the kind of in the West, I mean, in the East and Korea and so on, it's been around for a while, but in the in the West, it's like one of those rapidly growing uh fantastic new segments, and there's

all kind of ways to you can gamify it and so on. Um, so I think it's super exciting and if you look at entertainment in general, you just need to look at what do people spend their time on,
right?
And
games aren't just competing with games anymore. They're competing with every form of entertainment.
I mean, Tik Tok took up a good amount of depending on the age range.
Yeah.
Um, time spent, but also YouTube is one of the key winners. There's people spending much more time on YouTube than they did years ago.
And then games is one of those one of one of those categories. And um
if they spend more time on TikTok, they might spend less time playing playing casual games. There's still like the
maybe the hardcore gamer audience who sits in front of the PCs and so on. That's slightly different. But broadly, if you look at entertainment and games is part of entertainment, it's need to look at the broad um broad spectrum. And yeah, Micro Darmmouth is one of the uh

emerging winners.
Okay, I want to shift gears a little bit to talk about some of the deals that you've worked on. So recently, you advised track racer sale to Corsair. I think this month, last month, very very recently.
I think it was announced this month. Yeah.
Okay. So Corsair didn't put the terms in their press release, but
from their earnings calls and their filings, it was looked like it was 40 million in cash plus a 10 million in earnout.
Corsair paid roughly the same cash for Fanitech back in 2024 when the business was doing north of 100 million in sales. Um, and they just they bought that out of Endor's insolveny, I believe. So now that you've dealt with the same buyer in both conditions, what does that gap actually tell a founder about [clears throat] the cost of waiting to sell until it's almost I don't want to say too late but a little bit more distressed? Do you have any feedback on timing?

Well um so I mean tracker was it's I think as a very different situation than Fen attack which was in bankruptcy and um track racer is growing very nicely highly profitable and um doing great and it was also such a great synergies between what Fenitech already had provided with the steering wheels and so on and track racers with the with the frames the seats and everything else around it. So, it was um I I think a great win for everybody. Um timing in general, I think it's it first it's it's it's hard to time. A lot of early stage founders, they always
want to talk about M&A and who's going to buy them. I always recommend to them to get to know the buyers that the buyers know who they are and also build up a little bit of a relationship with even the CEOs of the large buyers or the senior executives. But otherwise stay heads down and focus what they do because sometimes people can get too excited about stuff and it's

just too early.
Um and it's always good to um you know seriously considering M&A if you have some inbound interest from people. If people reaching out to you it's kind of a little bit of a sign you might be at the right point at the right time versus actively just going out. Um on the timing I think um trend is your friend. So if you show significant growth if you can show some historic growth and then also reasonable can argue that you're going to grow very significantly over the last few years that's typically a you know
the best time
a great time because sometimes deal with that all the time. companies are doing great and then growth slows down or flattens out and that's when valuations come down a lot.
Yeah.
So you want to optimize on on growth. A lot of us deals in the gaming space um

the good deals those are companies that typically highly profitable.
Mh.
So there's um you know Fenitech obviously out of bankruptcy not doing [laughter] so well. Um and there's a lot of gaming uh studios or gaming tech which companies just just didn't make it. Yeah.
And they can't raise any more money. So it's a very difficult situation and um sometimes those deals happen but often the companies just go under.
Mhm. Um, planning also is if there like some major milestones, some some major releases. Um, it's sometimes worth exploring. Does it make sense to have some of those M&A discussions just before a major release or wait until a company launches a title, which sometimes then has more upsides if they do really well, but if they don't do so well, then
um there might be just no buyer out there. Um so um yeah and I wouldn't worry too much about the overall market condition. I

think the market conditions will improve modestly over the next few years.
Okay.
But I wouldn't say like yeah you need to wait till Q2 or Q3 next year. That's when a lot of stuff will happen. Um I'm personally very optimistic on um the excitement Grand Theft Auto will bring to the overall [laughter] market as well as the public market because a lot of people
a lot of the gaming equities have not performed great over the last few years and some investors now seeing like a single game can be so massive and get so many users excited, players excited. So, um, yeah, I think it's supposed to come out November 19th or something, so pretty soon. And hopefully that's going to lift the overall market.
Totally. And I think it speaks to like also the longevity of the game, the UGC components of the game. I think there's so much there. Um, yeah, I'm also very excited to see what's going to happen. Okay. Uh, so we we talked a little bit

about Midsight Steels and you actually brought up Hipster Whale being sold to Atari um this last quarter and I believe so they are profitable. They had 56% a beta margins and the franchise was pulling in 6 million monthly players in 12 years. Is this when it comes to like multiples and comps? Is this like what you're seeing like 6x in the market in this size? is I I would just love to hear a little bit about what we're seeing in terms of valuations and multiples these days for especially for studios.
Yeah, it's it's a right ballpark. It [clears throat] always depends on
does a company have a unique IP. So
Hipster with Crossy Road had a very well-known IP.
Um that really helps and then it comes back to again growth. the company's growing
10% a year versus 30 40 50 that plays buyers always project out what it's going to do to them in a year or two

out. So then if a company is growing a lot has a great IP uh then you can you know potentially get into like the double digit IBIDA and and it's also people you know um IBIDA is kind of a simplistic way to look at it. It's also how much money is being invested in the title and um specifically on mobile how much money is being put into uh UA thereby buyers look much more what's the return on ad spend uh what's the retention and just their belief
what the EPIDA will be let's say in a year or two or three okay
and that's how they value some of those deals um yeah
okay and so you've done deals with Zinga Anamoka, Reddit, Netflix, really different types of buyers. What's the one thing that locks in a great fit when everyone's in the room and then just doesn't work once the deals closes

closes? I'd love to hear about some past experiences you've had.
So, for us, once a deal closes, we're kind of off the hook. [laughter] And um I mean, we sold Nway to Animoka. I think that worked out really really well for Animoka for for a a long period of time.
Um when we sold Extra Games to Zingga.
Um so Excra games was headed up by by Max Schaefer. Um um um who was uh the creator of Diablo. So very well-known person and you know somewhat celebrity in the industry. and Frank when when Zingga was looking to expand into the PC space,
Frank Shabbo thought that you know getting him and the team on would really help Zingga's next title across mobile PC and so on and then um should they after take two acquired them and they

brought obviously a lot of PC um experience
um with them. One deal that comes to mind is uh we sold Lightream was a live video streaming company to a listed company in the UK
and um I think Lights was doing great and then I I think it was a little bit they probably didn't manage it right or sometimes that's a challenge and then I think 9 months later we were called again and say if we can find a new buyer so we ended up selling them to Exola.
Mhm. a year later. Um, obviously for much lower valuation than the first deal, but at least for the first buy, it was,
you know, they got at least some money back.
And um, [clears throat] but yeah, I mean, some of those deals work out great and others don't work out great. And um, it's it's typically a lot of the gaming content deals, it's cash, a close, and then earnout. M

and during the earnout period often the studies are being more or less left alone while maximizing synergies.
Yeah.
Um to help them grow. But sometimes when the deal is not structured like that and buyers come in and want to implement all of their um methodologies and whatever and then sometimes that kind of kills kind of the entrepreneurial spirit
and that's when um deals sometimes go south.
Yeah. Um okay. I want to So you described entering 2026 with strong momentum and a very positive outlook coming off a year of some blockbuster transactions. Now that we're almost halfway through the year, how is it tracking against your expectations and what do you think is the vest variable that could shift it for the rest of the year? I mean as I mentioned like [sighs] everybody's exciting about Grand Theft Auto so that could lift the overall market and when we look at M& activity kind of public equity valuations is always a key component if

if um the stock of some of the buyers has been flattered down. Um generally they're more cautious. Some of certain situation they say we really need to do something new and then they do but general they're more
cautious versus if it's slowly increasing everybody feels great and then they spend more time on um inorganic um growth meaning acquisitions. So, so one hope is one one big variable is depending how Grand Theft Auto will do and how the overall market looks at it's the hope is the whole market will be lifted but who knows it could stay the same or it could drop.
That's also kind of high expectations on on one game.
It is and you can also argue it's maybe already built in in the market because the market is forward-looking. So maybe the market expects a fantastic outcome and if it's also a really really good release then you know it could all come down. So it's really hard to say.

Yeah. Other big variables I mean um stuff like the the war in Iran doesn't help in general.
Uh specifically if you look at deals between the east and the west um so hopefully that will settle soon but who knows.
Yeah.
Okay. I want to talk a little bit more about ad tech. So I know a lot of investors in the gaming space and with outside the gaming space are really looking in to especially where AI can have impact on programmatic specifically. What are you excited about in the adtech space and where are you seeing the biggest crossovers between adte and gaming?
Yeah, I mean if you look at adte I mean in my mind there's two portions of it. one is actually the ads that are being shown and that's you know obviously he have heavily in mobile and
some adoptions on on on the PC side to a much lower extent but then there's also the user acquisition part
which is what all this a lot of the attack companies actually do and um yeah

there I can see that AI and and um
will dramatically help for companies that have a leading edge in there to
just um make that more efficient,
better target,
better get to better rorowass and all this kind of stuff and companies that maybe don't have that leading or bleeding edge might might lose market share.
Um, that's probably the biggest driver I see moving forward. And in mobile, it seems it's going to be even more and more really um um paid marketing.
Yeah. versus PC is kind of a very different segment. It's a lot of them building up the community, working more with influencers versus kind of uh brute force paid marketing. So, it's that's why I look at those two segments being very very different.
Yeah, absolutely. If you had to identify

one category of gaming company that you think is being undervalued right now, what would it be? I mean, I'm personally I think there's a lot of potential in like those double A studios,
okay?
And um it's it's similar. It's always hard to judge which one's going to do well and which ones don't. But I think that's a segment where you still can build up your audience um with a little bit of luck. You have uh highly successful launch and it's highly profitable for new like founders getting into it. Um like mobile is so tough at this point.
Mobile is so tough. Yeah.
Um and then I don't know there's some companies again doing stuff intersection between AI and gaming like um trying to really create games um much much faster with AI and obviously with some creative input.
Um that maybe might be not low on the valuation side.
Yeah. You saw me he just raised 400

million. I think it was a seed round too. Yeah, not sure how undervalued that is.
Pretty high. But yeah, probably the kind of double A space and we've seen um I think both V Games and Griffin Gaming have kind of this new indie AA fund.
Um so that's sometimes also a sign there's more opportunities there.
Yeah. Okay. And then I just have one final question for you. If a founder listening to this is sitting on a strong asset and trying to decide whether 2026 or 2027 is a better window to start the process, what would you tell them?
Well, going back what I said before, um, I think founders should mainly stay heads down and focus what they do and build relationships, get to know the right people. Um,
can I interrupt you there for one minute because you you did mention that before,
but this sounds so basic, but what's the best way to do that for a founder? Like, should they be games, GDC? Should they be leaning on their investors, but

especially a bootstrapped company that doesn't have VC manpower? What's the best way to get to know your acquirers or potential acquirers? Yeah, just uh conferences are probably the easiest and um maybe they don't meet the CEOs of take 2 or EA, but they meet might some you know senior executives at those companies and just um conference probably are the best one and they they have investors they should leverage investors. I think um that's great. And then again, it's always good if there's some inbound if there's no inbound. Um just looking what would make the um the asset really attractive. So I wouldn't look into what's the overall gaming market in 26 versus 27. I don't think it's going to be materially different.
It's more like what are the key inflection points in the company? Are we going to see significant growth? There's going to be a game launch. There are some other expansions where a lot of the

buyers would be interested in it. I would center it more around that than um kind of what the macro M&A environment is.
Got it. Is there anything else that we haven't covered that you'd like to discuss?
I think we covered a lot. [laughter]
Okay. Well, that Michael, thank you so much for taking time out of your very busy Gamescom schedule to sit down with me and the Navic podcast. We really appreciate you being here.
Thank you so much for inviting me. Awesome.
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