XSET Buys Illusive Media + POV on Digital x Gaming M&A
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss XSET’s acquisition of Illusive Media, including the deal value prop, key deal terms, cap table of XSET, and POV on digital and gaming M&A.
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Back in June, Diversified gaming co XSET bought creative studio Illusive Media.
It’s the first M&A deal since XSET’s $15M raise in 2022.
It’s also part of a broader wave of digital gaming M&A.
Let’s break it down…
💰SELLER: Illusive Media
- Full service creative studio known for innovation
- Does film production, creative direction, editorial, interactive design
- Launched 2002 as web design biz in Myspace days
- Founded by Shomi Patwary and wife Punom Patwary
- Produced music videos for Beyonce, A$AP Rocky, Diplo, The Weeknd
- Produced doc for 25th anniversary of Enter The Wu-Tang (36 Chambers)
- Brand clients incl Google, Facebook, UPS, Pepsi, Adidas
- 2B+ views on YouTube
- Team of 14 per website
💵💰BUYER: XSET
- Gaming entertainment and lifestyle company
- Does talent and partnerships across music, art, sports, fashion, entertainment
- Founded 2020 by Greg Selkoe, Marco Mereu, Clinton Sparks, Wil Eddins
- 130M+ followers across social channels
- Has gaming cabanas in Vegas nightclubs, award-winning merch collabs
- 8 esports teams across Valorant, Rocket League, Fortnite, Warzone, Apex Legends, more
- Activations w/ Roots Canada, Frank’s Red Hot, Google Pixel, Prize Picks, Boston Red Sox, NFL, and Amazon Studios/MGM
🧐M&A AND CAP TABLE HISTORY: XSET
- Unknown funding from Seed in 2020
- $15M Series A in 2022
- 25 investors incl LightWork Worldwide (SA lead), Alpha Sigma, Apex Capital, Baron Davis, Mind Melt Media, 6 NFL athletes, Swae Lee (seed lead), more
- Use of Funds: scale apparel drops / content / team / marketing
More info on LightWork (per Crunchbase)…
- Global streetwear and lifestyle brand
- Structured as hold co, incubator, and fund
- Invested in livestream commerce app Ezze
- Invested in streetwear brands 424, Round Two, Pyschworld, No Vacancy Inn, Supervsn
- For brands, goal is to take them global, w/ focus on China
✒️DEAL DETAILS
- Undisclosed
- Considering XSET’s $15M investment, I estimate structure to incl cash upfront, equity in XSET parent co, and earnout via growth of new XSET studio
✨DEAL VALUE PROP
- Help Illusive marketer clients appeal to gamer audiences and culture
- Create in-house studio for immersive gaming, lifestyle experiences
- Create in-game maps, digital skins, immersive digital worlds, short/long form content
- Grow audience focus in gen z and gen alpha
- Increase platform focus in Fortnite, Roblox, GTA
🤝POST DEAL OPS
- XSET Studios will live under XSET hold co
- Illusive chief Potwary will lead new XSET studios
- First collab project is Fortnite map w/ Miami Dolphins receiver
🤔WHAT I FIND INTERESTING & DEAL INSIGHTS…
On digital and gaming M&A…
Re gaming M&A over the past year, I’ve written about Oct 2023’s GameSquare / FaZe Clan deal, and March 2024’s Loaded / GG Talent Group deal.
I expect more M&A of digital agencies that help brands and marketers target gaming audiences, since gaming is a key channel to get infront of youth male demos in environments where they spend a lot of time and are highly engaged (NOTE: we’re actively advising on a deal in the digital gaming space). Another noteworthy deal here is the Jun 2024 “multi-million pound” investment in Kairos Group (rebranded to NewGen) from UK’s Business Growth Fund aka BGF. NewGen had previously grown through acquisitions, including Kyma Media and Horizon.
This gaming M&A is also part of the broader trend I endlessly write about on this blog, in that modern marketing agencies want to grow advertiser client revenues via new in-demand service offerings like branded content / influencer marketing / social media mgmt / paid digital media.
I also expect more consolidation around gaming IP / esports teams / orgs which will trade at large discounts VS a few years ago. GameSquare has done four acquisitions since Nov 2020, and Loaded has a $20M warchest from their Series A raise from Coral Tree back in 2022 – there’s likely meaningful cash still remaining after their GG Talent acquisition earlier this year, though TBD how that will flow to digital agency and influencer rep companies vs O&O IP business models.
NewGen’s press release about the BFG investment doesn’t list M&A as part of the new growth mandate, but I bet NewGen is still a buyer of gaming and agency assets. I also think of Fixated, the new diversified digital gaming company announced in May that provides brand services, creator representation, and has a content and gaming studio. There’s no public info on their capital stack, but they’re a new emerging player worth watching.
Have any thoughts on other key players in gaming x digital agencies who are active in M&A that I’m missing here?
Drop me a DM.
Alright, I’m on vacay next week in Maine. Our normal deal programming will return when I’m back post Labor Day 😉
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I’m the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.
DM me on LinkedIn or email me chris @ wearerockwater dot com
