Daily Brief: Take-Two Kicks Off The Year In Dealmaking With A Very Wholesome Acquisition

Daily Brief: Take-Two Kicks Off The Year In Dealmaking With A Very Wholesome Acquisition

about 2 years ago3 mins

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Gaming giant Take-Two Interactive announced on Monday that it’s buying Farmville-creator Zynga, so get ready to pop a cap in a darling tulip arrangement's ass.

What does this mean?

The pandemic’s spawned a lot of gamers over the past couple of years, but they haven’t called it quits just because lockdowns are behind them: they’ve shifted to mobile gaming instead. And Take-Two wants a piece of the virtual pie: the maker of Grand Theft Auto is buying all of Zynga’s shares for $11 billion – around 64% more than the mobile gaming specialist was worth before the deal was announced. That makes the acquisition one of the biggest-ever in the gaming industry, and will turn Take-Two into one of the world’s most prominent mobile game publishers. Take-Two is feeling confident about the move: the company reckons the deal could save it around $100 million a year and generate over $500 million in revenue.

Why should I care?

The bigger picture: Mobile’s where the money is.

Take-Two’s announcement comes just a year after rival Electronic Arts pushed into mobile gaming by buying Glu Mobile for $2 billion. They might be onto something: a recent report showed that revenue from mobile games made up a massive 52% of the gaming market last year. Consider too that mobile gaming revenue grew 7% last year even as revenue from consoles fell, and the sector seems like the place to be.

Mobile gaming

Zooming out: Start as you mean to go on.

Take-Two’s deal could be the beginning of another record-breaking year for mergers and acquisitions (M&A). After all, a new survey has shown that nearly two-thirds of CEOs think their companies will pursue M&A this year – up 48% from the start of 2021. That is, providing inflation doesn’t get in the way: 87% of participants also said they’re worried about rising prices, which could end up eating into their spare cash.

Global dealmaking

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Investors Expect Banks To Report Record Profits For 2021

Banks image

The biggest US investment banks are expected to report record yearly profits later this month, after they topped themselves up with a couple of boosters of their own.

What does this mean?

There are two main reasons investors are going into banks’ full-year updates with such high hopes. For one thing, America’s banks collect fees for every mergers and acquisition (M&A) they advise on, and 2021 was a record year for dealmaking. For another, America’s banks – which prepared for the worst when the pandemic first broke out – set aside plenty of cash in case pandemic-stricken borrowers couldn’t pay off their debts. And when it became clear that their customers were back on more stable footing last year, they gradually started to release the money back into their businesses – and their bottom lines crept up as a result.

Record profit

Why should I care?

For markets: Come for the deals, stay for the stability.

There are no guarantees that the dealmaking boom will keep going this year, but banks are in a strong position regardless: the US Federal Reserve has promised to raise interest rates, which will allow them to earn more on the loans they offer. That’ll come as welcome news to investors: loans are a much more stable source of revenue than M&A, which tends to ebb and flow with the economic tide. Put simply, banking stocks – which already rose 35% in 2021, versus the wider market’s 27% – could be in for another good year.

Bank stocks outperform

For you personally: Buy banks, ditch tech.

A very good year if the rate-hike speculation is to be believed: Goldman Sachs said on Monday it reckons the Federal Reserve could raise rates four times this year. So if you’re looking to make room for bank stocks in your portfolio, here’s an idea: scale back your investments in fast-growing tech companies, whose future profits become worth less discounted back to today when rates are on the rise.

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