"Investors recognise the low revenue growth opportunity and compressed margins in gaming, keeping capital on the sidelines," says S&P Global Market Intelligence

A new M&A report from analyst S&P has indicated a weakening investment environment for games, with available funding increasingly going to businesse models relying on recurring engagement, platform leverage or alternative monetization.

The largest M&A transactions in Q2 were "hyper concentrated on AI," which has "siphoned interest away from other areas, particularly software," S&P Global Market Intelligence's Neil Barbour tells GamesIndustry.biz.

There were 23 M&A transactions in the second quarter, totaling $1.15 billion in gross transaction value.

These included Shengsong Investment's $596.4 million minority investment in Wemade and DoubleUGames' $183.7 million offer to increase its stake in social casino operator DoubleDown Interactive.

The number of M&A transactions remained flat year-over-year in value but declined 85% from the first quarter.

S&P research analyst Barbour explains that this percentage drop reflects a market at "such a low level that the absence of a deal or two, even as low as $100 million, can have a major impact."

In private financing, there were 36 rounds totaling $519.7 million. Total funding increased 89.1% year-over-year, while the number of deals fell 29.4%.

The largest Q2 funding round was Veroplay's $215.6 million investment related to its acquisition of play-to-earn platform JustPlay. Grand Games raised $70 million to expand its mobile titles.

"The broader read is that investor and acquirier appetite has not disappeared, but it appears increasingly selective and not in a way that would advantage creative talent currently entering the market," says Barbour.

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