Esports Mogul narrows hunt for acquisition targets in video game sector

Esports Mogul ASX ESH March 2022 video games buy build
Esports Mogul is undertaking due diligence on acquisition opportunities in the video games sector.

Esports Mogul (ASX: ESH) says its buy and build strategy in the video game sector “progressed at pace” during the March quarter, with the company revealing it had already evaluated more than 50 potential acquisition opportunities.

Also known as its merger and acquisition strategy, Mogul’s buy and build plan has developed a large pipeline of suitable targets in the video game sector across multiple geographical regions including the US, Latin America, Europe and Australia.

To drive this strategy, Mogul appointed former chief operating officer of SEGA and Enad Global 7 Christopher Bergstresser to its board in February.

Due diligence

Under Mr Bergstresser’s leadership, the company has screened several companies that have passed to a more formal due diligence stage.

Mogul’s focus is on acquiring small-to-mid size gaming companies that fit its “carefully considered criteria” put together by Mr Bergstresser and his merger and acquisition team.

These criteria comprise companies with “strong founder lead teams, great IP, profitability and existing engaged audiences”.

Mogul noted these factors ensure future scalability and continued growth.

“Mogul is open to acquiring mobile and PC games companies with existing or new business models – including play-to-earn,” the company stated.

Mogul’s approach

According to Mogul, the critical difference between it and other gaming companies with buy and build strategies is its “dedication to managing operational synergies” from acquisition onwards.

The operational strategies comprise common financial infrastructure, centralised legal and HR and shared data visualisation.

“This approach allows group companies to re-focus on what brought them their past successes – making best-in-class games,” Mogul noted.

“Moreover, the structure enables group companies to learn from one another, cross-promote, help each other find new ways to innovate and embark on a lower risk pathway to scale rapidly.”

Name change and outlook

As part of the company’s renewed focus, it has proposed a name change from Esports Mogul to Mogul Games Group.

The name change is expected to secure shareholder approval at the AGM on 25 May.

Towards the end of the December quarter, Mogul refined its balance sheet with cost reduction initiatives.

As a result, the company closed out the March quarter with $4.89 million in cash.

Mogul says this is sufficient to maintain its “best in-class esports tournament platform” while pursuing its buy and build strategy.

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