How $13.4 million of losses at ngmoco makes its $403 million DeNA buyout seem a very good deal

Devil in the detail

How $13.4 million of losses at ngmoco makes its $403 million DeNA buyout seem a very good deal

Almost all non aggressive buyouts come as a result of two businesses finding a deal that accommodates both their interests.

Discovering just what those interests are, of course, is where the detail lies.

In the case of the $403 million buyout of mobile publisher ngmoco, DeNA's motivation was clear as soon as the story broke.

Already an established social gaming powerhouse in its home territory, the firm has openly stated that it wants a quick and easy route into the US market – ngmoco's line-up on mobile (including 50 million downloads on the App Store) and 12 million unique users on its Plus+ network too good to resist.

Hidden hurt?

Ngmoco's reasons for selling up were initially less clear, with the company having established itself as a major player on iPhone and Android in its own right since it launched in 2008.

However, a closer look at the financials behind the deal suggest the last two years have been more difficult for ngmoco than it might have appeared from the outside.

According to figures published by DeNA, though ngmoco's sales have risen steadily since launch – from $484,000 in 2008 to $3.16 million in 2009 – the company has endured spiralling net losses during the same period, hitting $2.46 million in 2008 and rising to $10.89 the following year.

In fairness, estimates suggest 2010 will be ngmoco's strongest year yet, with TechCrunch claiming this year's revenue run rate will top $30 million.

Regardless, such figures undoubtedly make the firm's $403 million buyout look like especially good business for ngmoco.

Money matters

As predicted, however, the money behind the move isn't being delivered in one lump sum.

With co-founders Neil Young and Bob Stevenson's respective 9.52 percent shares said to be worth $28 million each (based on the non earnout figure), the documents from DeNA also split the deal in full wide open, with $100 million being an earnout dependent on future financial results.

Of the funds produced upfront, $146 million is taken from DeNA common stocks, $27 in warrants and $128 million in cash.

[source: Mobile Entertainment]

With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.