Disney $1.5 B Stake in Epic Games, Betting on Gaming's Future
BANQUE D'INVESTISSEMENT
Ismael El Kherchi, Arnaud Bedrossian, Jin Long Lim
12/2/20232 min read
In 2023, global M&A activity was tempered by macroeconomic challenges, with high interest rates, inflation and elevated geopolitical uncertainties slowing down deals across sectors. In 2024, the tide is expected to turn, with deal-making poised to stage a rebound as the Fed signals its intent to ease monetary policy. Morgan Stanley believes a combination of strong corporate balance sheets, improving financial markets, and climbing CEO confidence will lay the foundation for a pick-up in dealmaking.
The push towards consolidation is expected to intensify as companies aim to achieve scale and diversify offerings to meet the evolving consumer preferences. From film and television to gaming and online media, the drive for content that engages across multiple platforms is fueling deals. The convergence of technology and entertainment, underscored by investments in virtual reality, augmented reality and artificial intelligence, is set to redefine the industry, making 2024 a pivotal year for strategic M&A in entertainment and media.
In a strategic move indicative of its commitment to the gaming industry, Disney has announced a substantial $1.5 billion investment in Epic Games, the developer of the Fortnite online video game. This deal gives Epic Games a value of $22.5 billion compared to the $31.5 billion it was worth two years ago. Giving them a 9% stake in Epic Games, this move by Iger is the largest step into gaming for Disney.
-Robert A. Iger, Chief Executive Officer, The Walt Disney Company.
Found on October 16, 1923, by Walt and Roy O. Disney, Disney has grown into a global entertainment powerhouse with diversified business segments, including media networks, parks and resorts, studio entertainment, consumer products, and interactive media. Disney's venture into the gaming industry is not new; the company has historically taken various approaches to video game development and publishing. Before shifting to a licensing model in 2016, Disney developed and published games through internal studios and acquisitions such as the purchase of Playdom and Club Penguin.
Disney and Epic Games plan to collaborate to create a universe that will expand Disney’s reach, where users can "play, watch, shop and engage with content and elements from Disney, Pixar, Marvel, Star Wars, Avatar and more.". Both companies have already collaborated before, and the integration of certain franchises has drawn more than 15.3 million players.
Overall, Disney's investment in Epic Games signifies a crucial step in its gaming strategy, positioning the company for future growth and innovation in the dynamic gaming industry. The completion of the transaction depends on standard closing requirements, which include obtaining regulatory approvals.
