Synova sells Tonic Games to Epic, nets 200% IRR

Greg Gille
03 March 2021

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Synova has sold its stake in UK-based video game developer Tonic Games to Epic Games, just two years after investing in the business.

The exit will result in a 9x money multiple and 200% IRR for the GP, according to a source close to the situation. Synova had bought its stake in the company (then known simply as Mediatonic) in March 2019. Previous investor Frog Capital, which acquired a minority stake in 2012, sold its stake as part of the 2019 deal. The exit generated a return of 7.4x for Frog.

Tonic was the seventh – and largest – investment from Synova's third fund, which closed on £250m in early 2016. It is the fund's second exit; at the end of February 2021, Synova sold Fairstone Group, an independent financial adviser (IFA) consolidation platform, to TA Associates, netting a 4.5x return.

Following the 2019 deal, Tonic went on to scale its team, technology and operations, Synova said in a statement. The main objective was for Tonic to begin building its own original IP, with the first project under that strategy being family-friendly battle royale game Fall Guys: Ultimate Knockout, which released in August 2020.

As of December 2020, the game had been downloaded 11 million times on PC gaming storefront Steam (where it is priced at £15.99, with the option of buying a number of cosmetic add-ons). The game has also become the most downloaded PlayStation Plus game in history, Synova said in a statement, and was nominated for the upcoming 2021 Bafta Games Awards. It is also regularly streamed to large audiences on YouTube, Twitch, TikTok and other social media platforms.

Since Synova's investment, Tonic's earnings have grown nineteenfold, while the employee base has doubled. The company's current financials remain undisclosed. According to public records, Tonic generated an £18.25m turnover and £4.17m adjusted EBITDA in the year ending in September 2019 (therefore not reflecting the launch and success of Fall Guys since then).

The company received several approaches from trade in recent weeks, with Epic prevailing given its track record in social gaming with titles such as Fortnite, which could allow Fall Guys to reach its full potential, according to the source close to the situation.

Synova declined to comment beyond the press release when contacted by Unquote.

Company
Tonic Games is the holding company of video game developer and publisher Mediatonic. Founded in 2005, the studio historically focused on the mobile and free-to-play markets, with past titles including Gears Pop! and Fantastic Beasts: Cases from the Wizarding World. It has since developed its own IP, including Fall Guys and a couple of other games currently in the pipeline.

Based in London, the business employs 350 staff globally.

People
Synova Capital – Philip Shapiro (managing partner); Zachary Tsai (partner); Thomas Usher (investment manager).
Tonic Games – Dave Bailey (CEO, co-founder); Paul Croft (co-founder).

Advisers
Vendor – The Raine Group (corporate finance); Latham & Watkins (legal).