Will artificial intelligence be able to quickly and cheaply develop video games in the future? EQT isn’t convinced. The Swedish private equity group has struck a deal to buy Dublin-based Keywords Studios, valuing the Aim-listed company at £2bn. Shares in the video game services provider have been under pressure from the threat of AI. The 67 per cent premium on offer from EQT suggests it thinks AI’s potential is overblown. In fact, EQT has a good price.
The trouble was Keywords had relied upon its high valuation to continue a roll-up strategy. It had hoovered up more than 60 bolt-on businesses since 2013. Its attempt to consolidate the sector was a lot easier when its shares were trading at a 40 times multiple of forward earnings in 2021, more than a 100 per cent premium to the rest of the sector. That valuation had sunk to just 10 times prior to the bid.