Someone with a nose for business...can you help explain this?


#1

It doesn’t seem like Asmodee being sold would be a good thing…


#2

At a glance: Eurazeo Capital, a private equity firm, bought 60% of Asmodee in 2013 for €143m. EC’s business model is to buy promising properties and invest heavily through financial and managerial support to grow them, usually aggressively. This accounts for all the acquisitions and mergers Asmodée (really, EC) has been doing over the last three years; it’s all been part of EC’s business plan.

Understand that when an equity firm like this buys properties, it is never their intention to keep them forever. Their sole business agenda is to create rapid value through aggressive investment and expansion, then sell their stake in part or whole to realize a profit. If EC wants to sell now, then they believe they’ve extracted the best ROI (return on investment) they can from Asmodee.

Note that this doesn’t mean it’s all downhill, business-wise, for Asmodee; it could just mean that the projected growth/profitability of Asmodee at this point is lower than EC feels they could get with another property (e.g. why settle for 5% growth if you can get 10% elsewhere). Certainly Asmodee has grown to a size where additional mergers and acquisitions will add less and less value comparatively.

To the end consumer, the sale is neither good nor bad, inherently. It depends on what the new owner does. If Asmodee’s management is left alone, then things could go on as before. If the new owner wants to impose changes, then that might impact things on a consumer level.


#3

Concur with our esteemed colleague. This isn’t necessarily bad news, I just think EC thought they could leverage more profit, have realised they can’t, and are looking to move on.


#4

It really depends on who buys it. I think EC has imagined Hasbro or Mattel would eagerly snap it up, and they well might. That would probably be fine for consumers, but not great for FLGCs. On the other hand, Amazon could decide they want to diversify in this way and offer all of Asmodee’s games exclusively on their site and nowhere else. Wal-mart or Target could do the same thing. That would not be fine. FLGCs would be in terrible shape, and consumers would be unhappy as well. But you look at who can afford to buy Asmodee right now, and it’s a limited pool.

The more I have thought about this, the more I don’t see a good result for FLGCs, honestly.

And, final point, I think one of the reasons EC wants out at this particular time is that it feels the boardgame industry is right now having its “moment”, that this is the plateau for the industry. And that is always the ideal time to sell.


#5

What are they asking, 10x what they paid? 15x?

I think they’ll be offering Asmodee up as a company ideally placed to enact a monopoly in all but name, cf. their distribution channels, exclusive regions, Asmodee games given preference or non-Asmodee not carried altogether, Etc.


#6

It’s hard to put a multiple on it—the numbers aren’t quite clear; EC might have only paid €98m for its original stake, and we don’t know how much they spent on the various acquisitions—I might put an absolute ceiling of 10x at this selling price, and likely smaller. Even at 4x-5x it would be a home run.

It’s certainly possible EC believes we’ve hit peak board games, but I wouldn’t read too much into the sale at this point. Most firms like this come in with a medium-term plan and that’s it. A 5-year plan is extremely common—10 years would be a very long plan for a company like EC—and we’re right at the 5-year mark, so it’s likely this is falling square on their original intentions.

It is true that if they saw possibilities for further growth multiples, they’d want to hang on for another year or two. But remember EC isn’t really trying to exploit the actual marketplace, they’re also creating most of the value by merging companies. So they’re not just playing the consumer market, they’re also finding underpriced properties and exploiting synergies in the acquisitions. Gobbling up more companies at this point would have lesser and lesser effect, especially as they’ve already got some of the most reliable games.

You also have to consider that if they want to sell, someone has to buy. And at $1.7b, it would take a very serious investor to even consider it. For comparison, Hasbro has a market capitalization of $11b, at this point only 6.5x Asmodée’s proposed sale value. (In 2014, it would have been closer to 50x!)


#7

5 years–that makes total sense. I hadn’t realized it had been that long already.

I also hadn’t realized Hasbro’s share of the market had fallen off so much! That’s crazy. What caused that? Knowing this makes me think Asmodee may be too high priced for a toy company to buy at this point. It may have to be a big box retailer or amazon, unfortunately. Or perhaps a European company I’m unaware of. Or Elon Musk!

Or…nightmare thunder crash organ music here…Zuckerberg! He could turn all of it into Facebook-only games and sell the cardboard versions exclusively via their site. I warned you with the music cue.

Also, I clearly need to consult @Bullwinkle about anything I do with my piddly IRA. I seriously have no idea.


#8

I am the worst stock picker in the whole world.


#9

But can you pull a rabbit out of your hat?


#10

I’ve got another business question, mainly out of curiosity.

When you have a product that relies on continued purchases, why not offer the base product for free? I don’t have the business terms for all this, so let me explain:

Take a CCG model. I was looking at Star Wars Destiny the other day, so I’ll use that. Clearly, a CCG model is based on convincing players to continue to purchase more and more of your product. So why not offer a free starter set to anyone who signs up with your website or something so that everyone can get a taste and, hopefully, want to buy more?


#11

The reason FFG don’t do this for their LCGs is, according to them, most purchases are of the base set.


#12

AEG used to do this when Legend of the Five Rings was still a CCG.

The base set wasn’t free, but they would give away tons of starter decks when every new set was released just to give players a taste.


#13

Our local gaming groups would also hand over free common sets of expansions to new players to help transition, and play common only routines :slight_smile:


#14

In the olde days, some ccg companies put out starter decks or promo card packs that you could get fro free from retailers or at conventions (Decipher did this a lot, as did a few others), and I always thought it was a smart thing. MTG has never done it because they don’t need to. Same for Pokemon. But yes, Star Wars Destiny should have handed out a starter deck and some dice to everyone they could. It’s a neat game. Don’t have anyone to play it with round me anymore, but I enjoyed it for a while.


#15

#16

$1.4 billion for a game company is sort of crazy. I mean, ok, if that’s what Asmodee is worth, then what’s Hasbro worth? Mattel? Seems crazy to me.

And selling to another private equity group is just going to see the company continue to aggressively be in acquisition mode, but likely globally now.


#17

Hasbro and Mattel are more than twice that, IIRC.

Asmodee’s acquisitions were global anyway. I think the growth shown will justify the price, even if it’s not quite the 1.4 billion, never mind the hefty-ish debt Asmodee has. They’ve not only been buying up publishers (that’s not actually that much of a problem, given the low barrier to entry and low standards for employees anyway), but distributors. The only real distributor in the UK is now Asmodee UK. They’ve also done the same in other European countries. That’s the main concern, that games from others will be shut off from distribution (I think we’ve already had examples of preferential treatment come out in the US, IIRC).

You can always start up a new publisher with one good game and get traction. Distributing it is another matter.

PAI usually take 4-6 years, so we’ll see how it develops.


#18

And sold.

https://www.eurazeo.com/wp-content/uploads/2018/07/2018-07-20-CP-N%C3%A9gociations-exclusives-Asmodee-FINAL-EN2.pdf


#19

Link doesn’t work for me. 404.


#20

Apologies.

Eurazeo announces the sale of Asmodee after a successful transformation

Paris, October 23, 2018 – Eurazeo announced today the effective sale to PAI Partners of its investment
in Asmodee, a leading international games publisher and distributor.

This deal perfectly reflects the in-depth transformation successfully completed in recent years by Stéphane Carville and his teams with Eurazeo’s support. In four years, Asmodee’s revenue has grown from €125 million to €442 million, representing an average annual growth rate of 37%, and is now generated 75% internationally. At the same time, publishing revenues increased to nearly two-thirds of games sales. The Group also completed 20 acquisitions, representing over €140 million in revenue.

The deal generating sales proceeds of €565 million for Eurazeo and its investor partners, including €426 million for Eurazeo, i.e., a return on the initial investment of nearly 4x and an Internal Rate of Return (IRR) of almost 35%.