Read from gamesindutry biz:
The games industry has seen an incredible flurry of investment in recent years, but one thing it hasn't seen much of to date is special purpose acquisition companies, or SPACs.
These companies raise money by going public before they have any business to speak of. The money from the initial public offering is then used to go out and invest in a sector where the SPAC management professes a particular expertise. To put it simply, the people who buy stock in a SPAC IPO don't know what they're going to wind up with, but they trust the management team to find something worth their money.
Tretton says SPACs are just another way to solve a problem he's been trying to crack ever since he left Sony in 2014, when he launched his own company to provide consulting for companies big and small, representing outfits looking to acquire and outfits looking to be bought.
"That led me to realize that not everybody wants to do acquisitions, but just about everybody in the indie space needs help raising money and it's very difficult to do from outside the industry," Tretton says.
When he first heard about SPACs, he liked how it gave companies easier access to money raised through public markets while letting the SPAC handle the regulatory and administrative overhead associated with the IPO. He also liked how it could let the target company remain largely independent and in control of its own destiny.
For example, Power Up Acquisition Corp. has raised almost $288 million through its IPO and is looking to invest it in a company with a valuation between $1 billion and $2 billion. Despite the size, Tretton still refers to that scale as "the indie space."
"The criteria we're looking for is first and foremost, a strong management team that's already having success but has eyes on growing their business and sees the appeal of our management team and public markets as a way to accomplish their goals," Tretton says. "But we're not looking to take over the management team or change the management team. We're looking to provide a support and mentorship role, in the form of maybe a board seat or two."
"The message every acquiring company says is, 'We really admire what you do. We want to allow you guys to be independent, and we're just going to provide you with resources to make you even better,'" Tretton says. "And hopefully that's true, but the reality is in many instances, they're getting stock in that new company and they're a cog in the wheel. As opposed to controlling 100% of their destiny, they're now dependent on the company that acquired them and their overall success. So they no longer say, 'All we have to do is execute our plan and deliver our numbers and we're going to be fine.' They now are dependent on their parent company's success."
"I do think the development prowess has outpaced the overall market prowess, meaning they may have expertise in game development but they don't have expertise in go-to-market strategies or fundraising," Tretton says. "And these are the type of things that are lacking in the indie space to actually grow their business. That's why there are so many mergers and acquisitions in the indie space. It's not because it's necessarily a goal of theirs, but it's kind of a necessary evil to grow their business, given the options available to them."
"This provides another tool. If you look at our industry, at $200 billion it's more than double the size of box office and the music industry combined, but the music and box office industry have been around a lot longer than the games industry, so means for artists or filmmakers to finance and grow their business are a lot more extensive than they are in games. We'll get there, but right now, given its infancy, it needs some help providing methods for companies to grow their business in the form of financial infusion."
The games industry has seen an incredible flurry of investment in recent years, but one thing it hasn't seen much of to date is special purpose acquisition companies, or SPACs.
These companies raise money by going public before they have any business to speak of. The money from the initial public offering is then used to go out and invest in a sector where the SPAC management professes a particular expertise. To put it simply, the people who buy stock in a SPAC IPO don't know what they're going to wind up with, but they trust the management team to find something worth their money.
Tretton says SPACs are just another way to solve a problem he's been trying to crack ever since he left Sony in 2014, when he launched his own company to provide consulting for companies big and small, representing outfits looking to acquire and outfits looking to be bought.
"That led me to realize that not everybody wants to do acquisitions, but just about everybody in the indie space needs help raising money and it's very difficult to do from outside the industry," Tretton says.
When he first heard about SPACs, he liked how it gave companies easier access to money raised through public markets while letting the SPAC handle the regulatory and administrative overhead associated with the IPO. He also liked how it could let the target company remain largely independent and in control of its own destiny.
For example, Power Up Acquisition Corp. has raised almost $288 million through its IPO and is looking to invest it in a company with a valuation between $1 billion and $2 billion. Despite the size, Tretton still refers to that scale as "the indie space."
"The criteria we're looking for is first and foremost, a strong management team that's already having success but has eyes on growing their business and sees the appeal of our management team and public markets as a way to accomplish their goals," Tretton says. "But we're not looking to take over the management team or change the management team. We're looking to provide a support and mentorship role, in the form of maybe a board seat or two."
"The message every acquiring company says is, 'We really admire what you do. We want to allow you guys to be independent, and we're just going to provide you with resources to make you even better,'" Tretton says. "And hopefully that's true, but the reality is in many instances, they're getting stock in that new company and they're a cog in the wheel. As opposed to controlling 100% of their destiny, they're now dependent on the company that acquired them and their overall success. So they no longer say, 'All we have to do is execute our plan and deliver our numbers and we're going to be fine.' They now are dependent on their parent company's success."
"I do think the development prowess has outpaced the overall market prowess, meaning they may have expertise in game development but they don't have expertise in go-to-market strategies or fundraising," Tretton says. "And these are the type of things that are lacking in the indie space to actually grow their business. That's why there are so many mergers and acquisitions in the indie space. It's not because it's necessarily a goal of theirs, but it's kind of a necessary evil to grow their business, given the options available to them."
"This provides another tool. If you look at our industry, at $200 billion it's more than double the size of box office and the music industry combined, but the music and box office industry have been around a lot longer than the games industry, so means for artists or filmmakers to finance and grow their business are a lot more extensive than they are in games. We'll get there, but right now, given its infancy, it needs some help providing methods for companies to grow their business in the form of financial infusion."
