Keywords Studios announces €11.2m acquisition after ‘robust’ quarter

17 Sep 2020

Heavy Iron Studios worked on the recently released Marvel's Avengers video game. Image: Crystal Dynamics/Square Enix

Following a strong earnings period, Keywords Studios has continued its acquisition spree with the purchase of Heavy Iron Studios.

In its second acquisition in as many months, video games services firm Keywords Studios has announced that Heavy Iron Studios will be coming into the fold in a deal worth up to $13.3m (€11.2m).

Based in Los Angeles, Heavy Iron Studios was founded in 1999 and currently employs 43 developers providing full game development, co-development, live operations and porting services for the video games industry. Primarily focused on high-end console and PC games, it recently worked on Marvel’s Avengers with Crystal Dynamics and the Call of Duty franchise with Activision.

Under the terms of the deal, Keywords Studios will pay $4m in cash, the equivalent of €500,000 in new ordinary shares to the seller one year from the acquisition, and the remaining $8.8m in cash and shares based on performance targets in the first two years of the acquisition.

“We welcome the extremely experienced and talented Heavy Iron team to the Keywords family,” said Keywords Studios CEO Andrew Day.

“The addition of Heavy Iron to the group further strengthens and scales our game development service line. By bringing a new base on the [US] west coast, it will provide access to many of the world’s leading game companies and the local talent pool from where we can expand our activities in the region and build upon our existing presence in audio and localisation.”

‘Strong demand’ from customers

The news coincided with Keywords Studios’ latest earnings report, covering what it described as a period of “robust revenue growth”. The company announced revenue of €173.5m for the first half of 2020, up 13.3pc on the same period last year.

The Dublin-headquartered company’s adjusted earnings before interest, tax, depreciation and amortisation were €30.8m, up from €25.8m in the same period last year. The company’s net cash figure now stands at €101m, versus debt totalling €9m this time last year.

This growth, Keywords Studios said, was supported by €110m it raised in its share placing in May. A further €100m is available under its revolving credit facility. Despite Covid-19 disruptions, particularly in its testing and audio services, strong revenue growth is expected across all its services in the near future, with the upcoming launch of new gaming consoles from Sony and Microsoft.

Commenting on the company’s earnings, Day said: “While margins were held back by lower volumes compared to our original plans for the year, outweighing the benefits of Covid-19-related cost savings, we expect our margins to move towards our historic norms as we settle into this hybrid working model to serve the strong demand we are seeing from our customers.”

Colm Gorey was a senior journalist with Silicon Republic