Russian media mogul Ivan Tavrin, who has a long history of buying up telecom and internet companies, is getting into the mobile gaming space with a $1.9 billion SPAC deal.
Tavrin launched blank-check company Kismet Acquisition One back in August of 2020 with the goal of acquiring a promising player in the digital space. He decided on Nexters, the Cyprus-based developer behind the popular role-playing game Hero Wars, in part at least because the U.S. market for SPAC deals was quickly getting crowded.
"The reason why we raised the SPAC is because we wanted to look at opportunities, not in the U.S. but in Europe, because we can clearly see that SPAC competition in the U.S. is getting hotter and hotter," Tavrin told Cheddar. "There are more and more very qualified sponsors
looking for companies."
He said the deal environment is creating a market that favors companies over buyers, where prospects get to pick and choose who buys them.
"If you look at the fact that now there are hundreds of SPACs looking for business combinations, there's probably more product than demand," Tavrin said.
As a Europe-based company with a global, borderless customer base, Nexters was a compelling option for the new SPAC.
A Reason to Go Public
For Nexters, going public was a vague long-term goal, but it was unclear at first how it would benefit a company that had already grown tenfold in the past two years.
"An IPO is a kind of [light at the end tunnel] for any business that has emerged from people with Russian roots, but we never thought of a reason to go public," said Anton Reinhold, chief business development officer for Nexters.
The new capital won't be propping up Nexter's basic operations. Instead it will be funneled into an aggressive M&A strategy. Reinhold said he couldn't name names given the competitiveness in the mobile gaming space, but that multiple companies had already lined up.
"Look, the company doesn't need cash, so there is no plan to use this for organic growth," Tavrin said of Nexter's business model, which relies on in-app purchases for much of its revenue. "The main purpose of the capital will be to acquire companies."
M&A activity in the mobile video game space is already booming. Investment was up 77 percent in 2020 from 2019, according to a report from industry-tracker Digital Development Management.
"You probably see a good deal in gaming every week," Tavrin said.
Reinhold emphasized, however, that developing its existing titles remains an essential part of its business. Hero Wars, for instance, has retained players for years, he said, by constantly providing new content.
"The market for RPGs is super sticky," he said.