HLD's 52 Entertainment sale on hold over valuation issues

The valuation of at least 15x EBITDA expected by French private equity owner HLD was deemed too high by the buyside, one of the sources and three additional sources familiar said.

HLD has no time constraints and is content to hold on to 52 Entertainment, investing in it for growth, one of the sources said.

American private equity firm Providence had been leading the race in auction, three sources and a sector banker said, one of them adding that the fund was in talks with the seller.

Another US-based firm, TPG Capital, was named by one source familiar and a sector banker as having entered exclusive talks with HLD at the end of the auction, co-organised by Rothschild and Aream & Co, as previously reported.

52 Entertainment's EBITDA stood at around EUR 40m for FY22, as previously reported.

Bidders had questioning the robustness of 52 Entertainment's long term growth, three sources said, one of them pointing to organic growth being too muted.

Potential buyers also doubt how strong flagship game Virtual Regatta really is, one of the sources said.

It is a high growth business whose revenue has been multiplied 12 times since 2018, one source familiar disagreed. Virtual Regatta has been selected for this year's Olympic e-sport games and embodies the pivot from bridge to a more diversified e-sport offer for the business, this source added.

HLD supported 52 Entertainment's external growth strategy since it acquired the business in 2018, with nine acquisitions carried out since then, according to its website.

This May, as the process was still ongoing, 52 Entertainment acquired Loop Games, a French gaming studio positioned on casual games, as reported. Bidders remained unconvinced by the acquisition, one source familiar said.

Loop Games is a leader in its market in the US, another source familiar said.

Earlier this year, 52 Entertainment entered the French Tech 120, a government support programme launched in 2019 dedicated to supporting France's most successful startups.

The business, headquartered in Villeneuve d'Ascq, Lille region, has more than 200 employees across 19 countries, according to its website.

HLD, Providence, 52 Entertainment, TPG Capital and Rothschild declined to comment. Aream & Co did not reply to requests for comment.

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