I wrote for Naavik about MTG’s $275 million acquisition of Hutch Games. Read the full article here.

Why I wrote about this

Deals priced in hundreds of millions are always worth a writeup. Moreover, MTG’s acquisition of Hutch offered a good opportunity to break down the valuation logic of growth-stage mobile studios.

The gist of it

Stockholm-based Modern Times Group (MTG) announced it would acquire UK-based Hutch Games for $275 million upfront, with up to $100 million in additional earnouts. Hutch, known for titles like F1 Manager, Top Drives, and Rebel Racing, joins MTG’s portfolio alongside InnoGames and Kongregate.

Based on reported revenues of $56.3 million and $13.3 million EBIT for the first nine months of 2020, Hutch appeared on track for roughly $82–88 million in annualized revenue. That places the upfront purchase price at approximately 3.1x–3.5x revenue — toward the higher end of comparable recent transactions.

I argue that revenue multiples are more appropriate than EBIT or EBITDA for growth-stage free-to-play companies. As long as a studio can reinvest profitably into user acquisition, prioritizing revenue growth — even at breakeven or temporarily negative EBIT — often maximizes long-term value. Hutch’s relatively strong profitability raised an interesting question: was it operating conservatively, constrained by capital, or under-leveraging performance marketing? Under MTG’s ownership, additional investment and marketing muscle could unlock further growth.

Key takeaways

  • MTG acquired Hutch at an estimated 3.1x–3.5x revenue multiple, toward the higher end of recent deals.
  • Revenue multiples are often more relevant than profit metrics for growth-stage F2P studios.
  • Hutch’s profitability suggested untapped growth potential through increased user acquisition investment.
  • Nordic public gaming companies were particularly aggressive in 2020 M&A activity.
  • Industry-wide consolidation accelerated in 2020, with $100M+ deals becoming increasingly common.