operating in a different business For founders and equity investors culture, or may not even be alike, an M&A sale to a big publisher required going forward. can be an ideal exit. The sale of This may be ideal for founders who the business will almost always be are looking to exit completely. For a matter requiring the consent of those staying on, however, they will existing investors, meaning their need to do their research on the co-operation and input on the buyer’s business culture to assess deals terms will be crucial. whether they’ll feel comfortable with On an M&A exit, founders and the new set-up. Key issues to agree existing investors will likely primarily as part of the sale process will be be focused on two key aspects: management’s go-forward incentive valuation, consideration and package, the nature of their future funds flow role and the level of control they will have over the business. the terms of the deal documents. Key considerations and The approach to consideration and deal terms funds flow can be best summarised as maximising the purchase price, A key factor for transactions in the maximising the amount of cash video game sector is the composition consideration which the existing of the business’s existing cap table. investors will receive on day one, While a lot of the company will and making sure the allocation usually still be held by the founders, of the consideration mirrors the as discussed in the Financing game waterfall in the latest investment businesses section, it’s now common documents. Depending on the share to see early-stage game companies capital structure of the company (ie raise venture capital and end up preference shares vs ordinary shares) with VC funds or other institutional and the exit valuation, some sellers investors owning significant stakes may receive more proceeds than in the company. others. The form of consideration will also be a key negotiating item – will 20