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Frank Gibeau on why Zynga’s $250 million acquisition of Gram Games adds up

Riding Merge Dragons! to success
Frank Gibeau on why Zynga’s $250 million acquisition of Gram Games adds up
Date Type Companies Involved Size
May 30, 2018 acquisition Gram Games Zynga $250m
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Mobile social game publisher Zynga has made its third and biggest acquisition in 14 months with the $250 million all-cash purchase of Turkish developer Gram Games.

The value of the deal may rise depending on whether Gram hits profitability milestones over the next three years.

Best known for hypercasual ad-funded mobile games such as 1010! and Merged!, the company has more recently been climbing the top grossing charts with its first IAP title Merge Dragons!

The game is currently a top 100 grossing game on iPhone in Germany, the UK and the US.

How the deal adds up

“We first met up about a year ago but the opportunity to bring what Gram does and what Zynga does together was more recent,” reveals Zynga CEO Frank Gibeau.

“The deal happened quickly and it’s compelling on a multiples basis. I think we got a good deal.”

In terms of that valuation, Zynga stated in its press release Gram would add $10 million to Zynga’s Q2 booking total following the deal, which closed on 25 May. This means the developer’s current monthly sales trajectory would annualise to around $120 million.

On this basis, the deal values Gram at twice annual sales, which is broadly equivalent to similar acquisitions.

“Gram Games are super talented guys and they’ve built a great culture.”
Frank Gibeau

For example, in 2017 Aristocrat bought Israeli midcore mobile game developer Plarium for $500 million at a 2.5 times annual sales valuation, while Take-Two bought Spanish casual mobile game developer Social Point for 2.8 times its annual sales. Most likely Vivendi was forced to overpay, spending 2.8 times annual sales to complete its hostile takeover of Gameloft in 2016.

Zynga didn’t announce how profitable Gram Games is (an alternative measure of company value is deal value relative to profits), but Gibeau said the deal would be accretive (or profitable) for Zynga from day 1.

Dragon powered

Of course, the point of spending $250 million is to gain an asset that can be optimised to generate increasing value in terms of sales and profits, and Gibeau certainly thinks that’s the case with Merge Dragons!

“Gram are super talented guys and they’ve built a great culture both in Istanbul and London,” he explains.

“We’re also big fans of Merge Dragons! I love it. It has a global audience and, over time, we think it could become one of our Forever Franchises.”

Merge Dragons! is climbing the top grossing charts
Merge Dragons! is climbing the top grossing charts

Zynga uses the term Forever Franchises as shorthand to describe games such as Zynga Poker, Words With Friends and CSR Racing 2 that sustain a large number of players over multiple years, generating hundreds of millions of dollars in the process.

Originally launched as a low key indie game that mixed Triple Town-style matching gameplay with base building and dragon collecting, Gram acquired Merge Dragons! from its creator Ray Mazza, who went on to oversee development as creative director at the company’s London studio.

“We like their enthusiasm and speed. It’s a unique approach and something Zynga can learn from.”
Frank Gibeau

Founded in Istanbul, Turkey in 2012, Gram opened its London, UK studio in 2017. Its 70 staff are split equally between both countries.

Fail fast, improve and repeat

Aside from Merge Dragons!, Gram’s operational skills in terms of fast prototyping and releasing new games and then quickly iterating their design following player feedback is something else Gibeau is keen to highlight and adopt more widely.

“We like their enthusiasm and speed. It’s a unique approach and something Zynga can learn from,” he explains.

“We’re buying this team and we want to get Zynga to work for them, not the other way around.”

As for whether this deal marks the end of Zynga’s M&A activities, following $143 million spent in 2017 acquiring Harpan’s Solitaire game and the card games of Turkish developer Peak Games, who coincidentally share the same investor as Gram (London-based Hummingbird), Gibeau is non committal.


After all, Zynga is now cash positive and prior to this deal held $635 million in cash and marketable securities, although it has also just announced a two year $200 million share buyback program.

“M&A is one of our four long term focuses, alongside live ops, launching new games, and investing in new formats like chat games,” Gibeau comments, saying it will always consider the right opportunities.

The immediate task, however, is integrating this deal to ensure those planned synergies play out. And Gibeau seems content Zynga’s now done enough M&A to reinforce the strategy that’s taken the once perennial loss-making company into sustained profitability.

“It wouldn’t be existential [for Zynga] if we didn’t do another deal like this,” he ends.

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