Devolver Digital acquires System Era in $40m deal

Digital publisher and indie video game developer Devolver Digital announced the acquisition of System Era Softworks on Wednesday for a total consideration of up to $40m.

The AIM-traded firm said the transaction, involving a combination of cash and shares, included an initial consideration of $22m.

It said System Era, founded in 2014 and based in Seattle, is an award-winning video game developer with 50 employees.

The company was best known for its successful multiplayer sandbox adventure game Astroneer, set in a space-exploration-themed world with full intellectual property rights.

Since its release in 2016, Astroneer has achieved significant success, amassing over $87m in gross revenues and attracting over 13 million players.

Devolver Digital said acquiring System Era was a strategic move to diversify beyond its core focus on premium indie titles.

It said it presented an opportunity to leverage System Era’s expertise in expandable game-style development and live operations technology, as well as its valuable intellectual property.

The acquisition would also allow Devolver to capitalise on System Era’s track record of creating high-quality, community-centred and long-lasting titles.

With the inclusion of Astroneer in its portfolio, Devolver was expanding its collection of intellectual property, creating a solid foundation for potential future titles developed by System Era.

System Era’s founding team boasted substantial AAA industry experience, with prior senior positions at companies including Ubisoft and Microsoft.

They had worked on notable franchises such as Halo, Assassin’s Creed, and Watch Dogs.

The total consideration of up to $40m comprised an initial consideration of $22m.

That initial consideration included $20m in cash at closing and $2m in shares and cash to be issued on the 12-month anniversary of the closing.

Additionally, there was $10m in deferred consideration and up to $8m in potential earn-outs, payable in both cash and shares.

Based on Devolver’s accounting policies and an estimated restatement of System Era’s unaudited numbers, System Era generated $7m in revenue and $3.8m in adjusted EBITDA in the 12 months ended 30 June.

Devolver said it expected the acquisition to have a positive impact on EBITDA in 2024, representing the first full year of ownership.

“The thing that excites me the most about System Era is the cultural and strategic fit with Devolver,” said chief executive officer Douglas Morin.

“This is a highly experienced, talented group of developers who come with a proven hit, Astroneer, in its eighth year.”

Morin said their know-how in expandable games development opened up a new player base and revenue stream for Devolver.

“We are looking forward to bringing the fun to new players in new, innovative ways - and above all, welcoming the team to Devolver in the coming days and months.”

At 0801 GMT, shares in Devolver Digital were up 1.96% at 26p.

Reporting by Josh White for Sharecast.com.