Mergers and Acquisitions in The Video Gaming Industry

Abstract

This research paper studies the effect of 102 M&A announcements during 2016-2020 in the video gaming sector. The purpose is to answer whether M&A events within the sector manages to create synergy gains for investors, or if it is just an act of management wanting to control larger firms, increasing the size of companies with little value added. The background of the paper is the recent rise in the debate around corporate leadership, consolidation, and its impact on game development and the new found reason to engage in M&A activity, namely acquiring key personnel. With the use of the event study method the acquiring companies cumulative abnormal return(CAR) in the event window was measured and compared to their expected return calculated through the estimation period. The results indicate that the CAR of 3.45% is significant. The results of the research is that value was created by the events during the time period, and that it might take more than one day for the news to be fully represented in the price of the stock. The paper also concludes that this result is mainly relevant for investors, and gives a recommendation for future researchers to consider using a shareholder perspective to get another angle of value creation and long term success for video game companies.