Keywords Studios agrees to £2.1bn takeover led by EQT

Keywords was advised by Deutsche Numis and Robey Warshaw. The company said it believed that the deal presented “a good opportunity for shareholders to realise value for their investment in cash upfront at a significant premium to the undisturbed share price”.

The agreement has to pass a shareholder vote and competition filings before it can be finalised, but these are not expected to be material.

Bertrand Bodson, 49, the chief executive of Keywords Studios, said: “This offer from EQT marks an exciting new chapter on our growth journey, with a like-minded partner that possesses deep sector expertise and a desire to accelerate the pace of our growth, both organically and through M&A, to unlock the many opportunities ahead of us across the entertainment landscape.”

• Keywords Studios — a company dreamt up in Ireland hitting the big leagues

Shares in the company, which closed up 72p, or 3.1 per cent, at £23.90, have almost doubled since the interest from EQT was disclosed in May. It is now valued at about £1.9 billion on the stock market.

Keywords Studios was founded in 1998 by Giorgio Guastalla, a former Microsoft staffer, and Teresa Luppino, his wife, to provide business software. Later it moved into the video games industry. It was floated in London in 2013 with a market value of £50 million.

One of a handful of games companies listed in the UK, Keywords provides services to the video games industry, including those involving artwork, translation and music creation. Its customers include 24 of the top 25 games companies, including Activision Blizzard, Electronic Arts, Epic Games, Microsoft, Netflix, Tencent and Ubisoft. It has 70 offices in 26 countries in Asia, Australia, the United States and Europe and employs 13,000 people, working on titles such as Diablo IV, Hogwarts Legacy, League of Legends and Assassin’s Creed.

EQT said there was scope for the business to expand into other areas, such as media and entertainment. It argued that Keywords could be more successful as a private company, where it could forge a longer-term strategy and increase its M&A activity.

“The global gaming services sector is characterised by constant change and innovation, accelerated by the emergence of generative AI,” it said. “Operating in the private markets, coupled with additional capital, would enable Keywords Studios to invest in innovation that is essential for it to keep up with this pace of change and sustain its status.”

EQT, founded in Sweden more than 30 years ago, has been investing in Britain for nearly two decades. It made its first investment in 2006 when it acquired SSP Group, which operates food outlets in travel hubs. It subsequently floated the business. Most recently it acquired Dechra Pharmaceuticals, the pet medicines business, and now has more than 15 other portfolio companies based in the UK. It is backed by a thousand institutional investors, with 30 per cent of its funds raised in the Americas.

Along with the company’s directors, two leading shareholders, Franklin Templeton and Pictet, had indicated that they planned to support the deal, EQT said.

The deal comes amid a growing trend of publicly quoted British companies being taken private as overseas investors hunt bargains in London’s relatively undervalued stock markets.

How the UK became a gaming superpower

Children messing about in their bedrooms on early computers in the early 1980s had little idea that they were in the vanguard of a British economic success story (Katie Prescott writes).

Along with the Commodore 64 and the ZX Spectrum, turbocharging the sector’s growth was the BBC Micro, a low-cost computer developed in collaboration with Acorn Computers, based in Cambridge, to prepare the younger generation for the digital age.

Part of the BBC computer literacy project, it was accompanied by a series of educational television shows and books. As schoolchildren were encouraged to experiment with the technology, it proved to be an excellent platform for budding programmers to create and share their games.

The “Dizzy series’, based around an egg-like creature called Dizzy, was one of the most successful British video game franchises of the late 1980s and early 1990s

They included Andrew and Philip Oliver, twins who were drawn to gaming in 1980 at the age of 12, by Space Invaders arcades and who later developed the much-loved “Dizzy series”, showing an intrepid egg somersaulting through a two-dimensional fairytale land.

Another pair of brothers, David and Richard Darling, formed Codemasters, the software specialist behind games such as BMX Simulator and Rock Star Ate My Hamster.

Then there was the Lemmings franchise, a huge success story published by DMA Design in 1991. The Dundee-based company, founded in the early 1980s by friends from a local amateur computer club, later spawned Rockstar Games and the blockbuster Grand Theft Auto series.

Gaming education has moved on a long way since then. Universities such as Abertay in Dundee and the University of South Wales offer world-leading courses in game design and development.

A pivotal moment for the sector came in 2014 with the introduction of video games tax relief. This incentive allowed developers to reclaim up to 25 per cent of production costs, providing a substantial financial cushion and encouraging both start-ups and established studios to set up shop in the UK. This set a trend for future policy support.

The sector now employs almost 50,000 people and has a market value of £7.8 billion, according to UK Interactive Entertainment, the trade body. Its success shows no sign of slowing as evolving technologies such as virtual reality and augmented reality open new frontiers beyond the wildest imaginations of those fledgling bedroom pioneers.