Keywords Shares Jump on VMC Deal, Its Largest Acquisition To Date

Keywords Studios will buy North American video games quality assurance and technical services support provider VMC Consulting Corporation and Volt Canada Inc. (collectively known as VMC) for USD 66.4m, its largest acquisition to date.

VMC was founded in Seattle and in Montreal in 1999 and now employs 1,300 people (directly or indirectly). It is currently headquartered in Redmond and has offices also in Texas and New Mexico.

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In a regulatory filing, Keywords said the deal would increase its market share and footprint in North America as it expects to grow its functional testing and customer support offering in the region.

“We look forward to working with the team at VMC to support their growth as part of a group providing similar services,” CEO Andrew Day said in a statement.

Synergies and Cost-Savings

Keywords said its board of directors are confident that opportunities exist for cost-savings as VMC is integrated into the operations within two years.

“Management estimates annualized savings of USD 1.5m in the first year and a further USD 1m in the second year of ownership,” it stated.

For one, Keywords said it sees an opportunity to cross-sell its services to VMC’s client base,  and to offer VMC’s embedded service model as well to its own major clients.

Raising More Capital

Under the terms of the deal, the purchase price of USD 66.4m is payable in cash upon completion of the acquisition. Combined with approximately USD 5m of working capital and transaction costs, it will be funded through raising approximately GBP 75m (approximately USD 100m) from a share placement on the stock market.

It noted that VMC has an adjusted revenue of USD 57.4m and adjusted EBITDA of USD 6.4m on an annualized basis in the year to October 2017.

Keywords has been growing its support solutions across seven service lines — art creation, software engineering, audio services, functionality QA, localization, localization testing, and player support.

VMC’s US and Canada operation will be integrated in Keywords’ America’s region across these service lines under the leadership of Nicolas Liorzou, Regional Managing Director, Americas, who also managed the integration of Babel, which the company acquired in February 2014, and Enzyme in November 2016.

Up 1,000% Since IPO

VMC’s acquisition came less than a week after Keywords acquired British software development company d3t, and a couple of months after a buying spree in France, taking in four Paris-based localization firms.

1-year chart (KWS)

The markets love the deal, pushing Keywords’ share price up nearly 20% on the back of the acquisition. The company’s market capitalization is fast closing in on GBP 1bn. To put that into perspective, that is up more than 1,000% since the IPO in 2013.

Eden Estopace

IT journalist and Online Editor at Slator. Loves books, movies, and gadgets; writes for a living, but codes for fun.