XSET Buys Illusive Media, POV on Digital x Gaming M&A

Welcome to RockWater Roundup! Analysis to make you a better investor and operator in all things media, agency, and creator economy.

Hi readers,

Today we discuss XSET’s acquisition of Illusive Media, including the deal value prop, key deal terms, cap table of XSET, and POV on digital and gaming M&A.

Other quick hits:

• Southeast Asia cultural marketing agency seeks new strategic owner → Clear growth opps to provide more services to existing clients, bolster efforts to build new client relationships, expand into the growing SEA market, and invest in lean team via high-leverage leader. DM me if interested.

- Blue-chip global and regional clients

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• We recently closed on the sale of a branded UGC tech platform. More details to come post Labor Day.
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• Our M&A and strategy team at RockWater specializes in advertising and IM agencies, digital publishers, and social channels. DM me if you need help on valuations, diagnostics to assess buyer attractiveness, growth strategy, or running a buy or sell-side M&A process.

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Chris, Founder of RockWater

XSET Buys Illusive Media, 1st Deal Since 2022 Fundraise

Back in June, Diversified gaming co XSET bought creative studio Illusive Media.?

It’s the first M&A deal since XSET’s $15M raise in 2022.

It's also part of a broader wave of digital gaming M&A.

Let's break it down...

?

??SELLER: Illusive Media

• Full service creative studio known for innovation
• Does film production, creative direction, editorial, interactive design
• Launched 2002 as web design biz in Myspace days
• Founded by Shomi Patwary and wife Punom Patwary
• Produced music videos for Beyonce, A$AP Rocky, Diplo, The Weeknd
• Produced doc for 25th anniversary of Enter The Wu-Tang (36 Chambers)
• Brand clients incl Google, Facebook, UPS, Pepsi, Adidas
• 2B+ views on YouTube
• Team of 14 per website

?

????BUYER: XSET

• Gaming entertainment and lifestyle company
• Does talent and partnerships across music, art, sports, fashion, entertainment
• Founded 2020 by Greg Selkoe, Marco Mereu, Clinton Sparks, Wil Eddins
• 130M+ followers across social channels
• Has gaming cabanas in Vegas nightclubs, award-winning merch collabs
• 8 esports teams across Valorant, Rocket League, Fortnite, Warzone, Apex Legends, more
• Activations w/ Roots Canada, Frank’s Red Hot, Google Pixel, Prize Picks, Boston Red Sox, NFL, and Amazon Studios/MGM

?

??M&A AND CAP TABLE HISTORY: XSET

• Unknown funding from Seed in 2020
• $15M Series A in 2022
• 25 investors incl LightWork Worldwide (SA lead), Alpha Sigma, Apex Capital, Baron Davis, Mind Melt Media, 6 NFL athletes, Swae Lee (seed lead), more?
• Use of Funds: scale apparel drops / content / team / marketing

?

? ? ?More info on LightWork (per Crunchbase)…

• Global streetwear and lifestyle brand? Structured as hold co, incubator, and fund Invested in livestream commerce app Ezze? Invested in streetwear brands 424, Round Two, Pyschworld, No Vacancy Inn, Supervsn For brands, goal is to take them global, w/ focus on China

?

??DEAL DETAILS

• Undisclosed
• Considering XSET’s $15M investment, I estimate structure to incl cash upfront, equity in XSET parent co, and earnout via growth of new XSET studio?

?

?DEAL VALUE PROP

• Help Illusive marketer clients appeal to gamer audiences and culture
• Create in-house studio for immersive gaming, lifestyle experiences
• Create in-game maps, digital skins, immersive digital worlds, short/long form content
• Grow audience focus in gen z and gen alpha
• Increase platform focus in Fortnite, Roblox, GTA

?

??POST DEAL OPS

• XSET Studios will live under XSET hold co
• Illusive chief Potwary will lead new XSET studios?
• First collab project is Fortnite map w/ Miami Dolphins receiver

?

??WHAT I FIND INTERESTING & DEAL INSIGHTS…

?

On digital and gaming M&A…

Re gaming M&A over the past year, I've written about Oct 2023’s GameSquare / FaZe Clan deal, and March 2024’s Loaded / GG Talent Group deal.? ?

I expect more M&A of digital agencies that help brands and marketers target gaming audiences, since gaming is a key channel to get infront of youth male demos in environments where they spend a lot of time and are highly engaged (NOTE: we’re actively advising on a deal in the digital gaming space). Another noteworthy deal here is the Jun 2024 "multi-million pound" investment in Kairos Group (rebranded to NewGen) from UK's Business Growth Fund aka BGF. NewGen had previously grown through acquisitions, including Kyma Media and Horizon.??

This gaming? M&A is also part of the broader trend I endlessly write about on this blog, in that modern marketing agencies want to grow advertiser client revenues via new in-demand service offerings like branded content / influencer marketing / social media mgmt / paid digital media.?

I also expect more consolidation around gaming IP / esports teams / orgs which will trade at large discounts VS a few years ago. GameSquare has done four acquisitions since Nov 2020, and Loaded has a $20M warchest from their Series A raise from Coral Tree back in 2022 – there’s likely meaningful cash still remaining after their GG Talent acquisition earlier this year, though TBD how that will flow to digital agency and influencer rep companies vs O&O IP business models.

NewGen's press release about the BFG investment doesn't list M&A as part of the new growth mandate, but I bet NewGen is still a buyer of gaming and agency assets. I also think of Fixated, the new diversified digital gaming company announced in May that provides brand services, creator representation, and has a content and gaming studio. There's no public info on their capital stack, but they're a new emerging player worth watching.? ?

Have any thoughts on other key players in gaming x digital agencies who are active in M&A that I’m missing here?

Drop me a DM.

Alright, I’m on vacay next week in Maine. Our normal deal programming will return when I’m back post Labor Day ;)

I'm the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.?

DM me on LinkedIn or email me chris @ wearerockwater dot com