General / Off-Topic Financial Times: David Braben calls for more British investment in its gaming companies as barriers to takeover attempts

StuartGT

StuartGT
Copy pasta from the paywalled article

UK gaming veterans call for investment in British companies​

Sir Ian Livingstone and Frontier Developments’ David Braben hit out at loss of UK-based companies to foreign buyers​

Two veterans of the video games industry have called for Britain to invest more in homegrown talent and prevent the loss of further UK-based companies to foreign buyers, after a year of frenzied dealmaking in the gaming industry.

David Braben, who founded Frontier Developments, one of the last remaining public gaming companies in the UK, said it was a “real shame” to see so many British firms, such as Codemasters and Sumo Digital, getting acquired by overseas groups.

“We don’t celebrate success in this country in the same way the US does,” he said. “We find it hard to go beyond a certain growth stage without being acquired, which is why more and more companies are staying private.”

Sir Ian Livingstone, who helped bring to life Tomb Raider’s Lara Croft and the Warhammer fantasy games and has worked in gaming for nearly 50 years, said: “You’ve seen how many companies have just sold out earlier than they should have done because of being unable to get venture funding [or float in an initial public offering]. People were just not investing in the space.”

To help address the funding gap, Livingstone’s latest project, Hiro Capital, is this week launching a new €300mn venture fund to invest in video games and “metaverse technologies”, which will help developers to create virtual worlds.

The concerns come amid a wave of global dealmaking in the video games industry as competitors fight to secure strong gaming intellectual property. Microsoft last month bought video game maker Activision Blizzard for $75bn, the biggest-ever deal by the tech company.

Deals for UK video game makers rose by 63 per cent in 2021, to reach £1.9bn in 2021, according to research from accountancy and business advisory firm BDO, as overseas companies sought to snap up some of Britain’s successful studios. This included US gaming giant Electronic Arts’ £1bn purchase of Playdemic, the maker of Golf Clash, as well as completing its $1.2bn acquisition of Codemasters. Chinese tech group Tencent acquired Sumo Group, the designer of Sonic Racing, for £850mn.

These purchases came against a backdrop of British anxiety that its capital markets are waning in significance as an increasing number of technology companies seek to move or list overseas. Earlier this month, Japan’s SoftBank revealed plans to list Arm, one of Britain’s most successful companies, on the US Nasdaq rather than the London Stock Exchange.

Staffan Ekstrom, a partner at EY who has advised on gaming deals for more than 10 years, said US buyers will make “calculated moves”.

“They’ll be looking for companies with low valuations, great IPs and an ownership structure that makes it possible,” he said. “If you have a big title or launch that hasn’t gone well, you can expose yourself.”

Braben conceded that Frontier has been seen as an acquisition target because of its strong roster of successful games which have gained cult status, such as space-epic Elite Dangerous and Jurassic World Adventures. Tencent, which has bought several UK studios over the past few years, took out a 9 per cent stake in Frontier in 2017.

But the UK gaming company’s shares have dropped 52 per cent over the past year to reach a market capitalisation of £492mn, driven in part by slower than anticipated games releases.

“If you look at what happened to the share price it wouldn’t make sense to do anything now,” Braben said of the possibility of a sale, adding that the 33 per cent stake he and his wife had in the company would act as a “natural barrier” to any takeover attempt.
 

Danny2020

D
StuartGT said:
“If you look at what happened to the share price it wouldn’t make sense to do anything now,” Braben said of the possibility of a sale, adding that the 33 per cent stake he and his wife had in the company would act as a “natural barrier” to any takeover attempt.
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Oh bless. He still thinks a takeover could only be done on his terms.
 

Darth Ender

D
slower than anticipated game releases. ...definitely not bug ridden half complete game releases that lead to indefinite postponements to future releases in existing platforms.

nope. not that ... if anything, the release schedule needs to be bumped up .. even less time taken to qa/qc or actually finish the game mechanics being introduced so we can get those releases out faster. That's the solution.
 

Gortron

Gortron
Perhaps the problem is absolutely terrible management. If a company doesn’t want to be taken over it could just not go public in the first place.

British companies are fantastic at running themselves into the ground by wasting opportunities. Frontier had an amazing IP with Elite. A fan base with more money than sense that paid to bring Elite back. What did Frontier do with that all that good will?

…. build loads of theme park games, create a DL Crap store and sell an enormous chunk of itself to China.

I hope Hello games take over one day and then Elite might become what those of us that made it possible hoped for.

The U.K. tax payer absolutely should not be paying to protect Frontier from their own greed and incompetence.
 

Chaparral

Chaparral
We are a local company. We made some bad design choices, produced incomplete products, and now the market does not value our company as highly as it used to.

We need your money so we don't lose control of our company.

I wonder if that tencent guy on the FDEV board is advising tencent to cut and run or do the happy vulture dance?
 

Star Wanderer

Star Wanderer
Sounds to me like they are trying to sell them selves.
With Elite in decline, JWE already on it's 2nd version after just few years, and F1 Manager as the only upcoming release this year. Yea, maybe it's a good time to retire for them.
After Odyssey, who knows how F1 will turn out. And Elite is already an old game, with questionable future.
 
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SkipRat

SkipRat
It's not just about money. It's about law too.

The current law currently puts the interests of the investors and profits over the interest the local community, the employee's and the long-term interests of the company. So when a company comes in for a hostile takeover, if it goes to arbitration, the arbitrators will always favour the interest of the investors et al, because that is the Law in the UK.

This needs to be addressed as soon as possible, as it has led to many companies being asset stripped to the detriment of the local community and economy.

It is why you should always buy from local independent shops if you can. As chain stores, pay minimum wage to stay, whilst extracting money from the local economy and shoving them in offshore bank accounts. Whereas, small local shops are owned by people living in the local community, employ people in the local community, the money stays in the local community and is spent and circulated within the local community and obviously improving it.

But David is also correct. The UK is currently heavily reliant in overseas investment. This means that, whilst low paid jobs are created, the investors remove vast amounts of wealth out of the country. I mean, the Chinese and French governments own huge chunks of energy suppliers as investors. So when the people of the UK are struggling with the cost of living and fuel prices, the Chinese and French are making money at the UK's expense.

What needs to happen, is the UK needing a national bank. Why a national bank? Because a national bank doesn't play Russian roulette with people's bank accounts, making incredible amounts of wealth for themselves, whilst providing very little return for the owner of the said bank account that is being put at risk.

What National Bank accounts do, is invest in local people and local businesses, the bank's profits are then recycled as new investment back in the local community, the profits of which, and on and on and on. They don't make as much as investment banks, but they do make a profit and that profit which is reinvested in the local community. And it breeds prosperous communities that benefit everyone, rather than the top 1%, like investment banks do. A fairer share of the wealth if you will.

The best example of this, is the Bank of North Dakota. During the 2008 banking crash, the Bank of North Dakota, made between $2-3 billion. When almost every bank and investment firm in America almost collapsed (And they would have, if it wasn't for the people of America having to hand over $700 billion in a government bailout), that the investors spent immediately on private jets, fast cars and new houses etc. The reason why the Bank of Dakota was one of very few banks that actually made profit during this period, was because it wasn't an investment bank. the banks interest overseas, it was the local community and how it supported it. This is how banks used to be, until Thatcher and Regan changed the banking regulations in the early 80's.

So for FDev to continual to grow, I think we need change the way we do stuff, we need to place the interests of the business, employee's and local community first, above the interests of oversea investors. Then support these companies financially through a local/national bank/banks, recycling the profits for benefits of everyone, rather than rich investors who's main interest is their personal wealth.

P.S. This not political, this reply is a bit of history, a bit of background in response to the OP.
 
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