VCs sell Peak Games to trade for $1.8bn

The deal comprises $900m in cash and $900m in Zynga stock, according to a statement from the company, paying Peak Games' shareholders 114 million shares priced at $7.92 apiece.

The deal is expected to close in Q3 2020.

"We first invested in Peak Games in early 2011 on invitation of co-founder Evren Ucok, who later became an Earlybird partner," Roland Manger, partner and co-founder of Earlybird, told Unquote.

"In the initial years, the company had triple-digit growth and invested only in growth," Manger said. "To come to the kind of revenue levels it has now and to release two blockbuster games, it takes a lot of initial marketing spend. But more recently, the company has had solid EBITDA margins, similar to the margins of Zynga's games."

In November 2017, Zynga acquired Peak Games' mobile card games division for $100m.

Asked about how the exit came about, Manger said: "We were far beyond the Earlybird IV lifetime, but the company was doing very well. We may have preferred an earlier exit due to the stage of the fund life, but we knew the deal had to work for everyone, including the founders and the team. Peak Games had already sold a company to Zynga in 2017 and that deal created a relationship; over time, the team at Peak could observe what Zynga was doing with that group, which created a view on what could be, and provided the necessary trust and positive outlook for the Peak team. It was a proprietary deal, really due to Zynga, who did a great job in doing a small early transaction and building a good relationship."

The deal marks the largest distribution of venture capital returns for a Germany-based venture fund, according to a statement from Earlybird.

The sale has realised 8.6x gross fund returns for Hummingbird, according to a statement from the firm, and a 200x return on the firm's original ticket.

Asked about Earlybird's returns, Manger told Unquote: "We have generated $524m in returns, which will be a great IRR, given the multiples and that we invested $16m over almost nine years."

Previous funding
Hummingbird made a seed investment in Peak Games n 2010, investing €500,000 at €2m pre-money.

Earlybird first backed Peak Games in a funding round in May 2011. "We invested in Peak in a number of all-equity tranches, via two funds: initially we invested almost $13m from the main pool of Earlybrd IV, and then $5m from the opportunities fund linked to Fund IV," Manger told Unquote. "Once fully diluted, allowing for a significant incentive for employees and management, this gave us a 30% equity stake and a much larger stake in voting rights." Earlybird Fund IV held a final close in August 2008 on €127m.

Endeavour Catalyst backed a funding round for Peak Games in January 2013, along with its existing investors. The firm held a stake in the company that amounted to around half of Hummingbird's participation, Unquote understands.

Company
Founded in 2010, Peak Games has produced mobile app-based games Toon Blast and Toy Blast, the latter of which has generated 51% of the company's total revenues. The company has 100 employees and is based in Istanbul. According to a statement from Zynga, the acquisition of Peak Games will add $40m to its own revenues on closing.

People
Peak Games – Sidar Sahin (founder, CEO).
Zynga – Frank Gibeau (CEO).
Earlybird Ventures – Roland Manger (partner, co-founder).
Hummingbird Ventures – Pamir Gelenbe (partner).

Advisers
Equity – Aream & Co, Afam Aream (M&A); P+P Pöllath + Partners (legal).

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