Keywords Studios forecast to increase acquisition spend

Dublin-headquartered gaming company Keywords Studios is likely to ramp up spending on acquisitions again in 2020 after a relatively quiet year, according to brokers.

A note to investors from Numis Securities suggests a pick-up in pace to an average of spending between €30 million and €80 million next year on acquisitions.

Keywords, which was recently named Irish technology company of the year, has spend an estimated €233 million on acquiring 37 companies since 2014 to the end of October. However, spending over the last two years has slowed somewhat with just five deals in the year to date.

Among recent acquisitions was a €3.7 million deal for German dubbing and voiceover provider TV+SYNCHRON Berlin, which was announced in September. Other deals announced this year include the €2.2 million purchase of Canadian broadcast services company Descriptive Video Works, and the €950,000 acquisition of Japanese games development firm Wizcorp.

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Keywords, which provides a large range of services to the video games industry, has agreed terms for a €140 million revolving credit facility with Barclays Bank, Citibank, HSBC and Silicon Valley Bank.

According to the investor note, recent concerns from investors over slower revenue growth seem to be misplaced.

“We continue to view Keywords as an excellent long-term investment, with value creation from both further acquisitions and organic progress,” said Numis analyst Will Wallis.

“We believe that Keywords remains a very attractive way to play the long-term growth of the video game market,” he added.

50 facilities

Keywords was established in Dublin 1998 and now has more than 50 facilities in 21 countries, that provide services such as software engineering, testing and customer care services for 23 of the top 25 game companies.

It listed on the AIM in 2013 and has a market value of over €1 billion. In August it reported a near 40 per cent rise in first-half revenue to €153.2 million.

“Keywords holds itself out to be a business with simple revenue recognition and very high underlying cash return on operating assets. Our analysis fully supports the view,” Mr Wallis said.

Keywords was named company of the year at the annual Technology Ireland awards in Dublin in late November. It also took home the “outstanding achievement in international growth” award in recognition of its phenomenal growth in recent years.