Major Investment And M&A In The Metaverse

What Is the Metaverse?

The metaverse is an immersive digital online environment that links social and commercial activities through technologies such as virtual reality and augmented reality to create 3D virtual spaces that mimic reality. Its use is quite broad and can be applied to gaming, work meetings, e-commerce, socializing, or entertainment. The term “metaverse,” which was first introduced in the 1992 novel Snow Crash, is today considered a way to truly redefine the Internet. It is a concept that is still being shaped, but the vision is rapidly evolving. There is not necessarily one single defined metaverse, as various companies are working to shape the idea in their own ways. For example, blockchain tech such as cryptocurrency and non-fungible tokens (NFTs) are being used to support digital transactions in the metaverse. Video game makers are shifting their online worlds to resemble social networks with a market opportunity to expand to include live entertainment such as concerts and sporting events. With this transformation comes a battle for the share of social media ad revenue. And as the metaverse continues to evolve, it continues to represent a huge business opportunity.

Massive Investment in the Metaverse

More than $2 billion was invested in augmented reality ventures last year, as well as $62.8 billion in virtual world products. Last year, Bloomberg analysts predicted that the entire metaverse market could be valued at a whopping $880 billion by the year 2024. But some forecasts have put that number even higher. Analysts at Citi have forecasted the metaverse market to be worth $13 trillion by 2030.

Metaverse M&A

Over the past year and a half, metaverse mergers and acquisitions have already totaled $77 billion. The potential for economies of scale is enormous in what may be the most significant digital transformation in the last two decades. There is a tremendous opportunity for product design, user experiences, and everything else that makes it possible. Buyers are targeting everything from video game makers to virtual reality headset makers. For example, Microsoft is currently working a deal to spend nearly $70 billion on the acquisition of video gaming company Activision Blizzard, calling it a “building block for the metaverse.” So, that’s one deal that is almost the total M&A deal value over the last 18 months. That’s just one example of how M&A in this space is no joke.

The metaverse is not just about gaming platforms, though. Workplace collaboration is also a major strategy. This past spring, a special purpose acquisition company (SPAC) bought EON Reality for $655 million. EON offers virtual reality solutions for 3D offices. Dating is also a popular realm in the metaverse. Last year, the Match Group bought Hyperconnect for $1.725 billion. Hyperconnect is a video messaging and social media firm, and the acquisition is designed to create a single virtual space where single people can meet. And VR hardware providers are also getting plenty of attention. In August of last year, ByteDance (TikTok’s parent company) bought VR headset manufacturer Pico Interactive for $700 million. Pico was the world’s third-largest VR headset maker in Q1 of 2021.

This surge in metaverse M&A demonstrates the growing confidence in how virtual spaces can generate real cash. People are making large amounts of real money all around the world with digital assets such as NFTs. It’s a bit of a revolution where great ideas for the virtual world have incredible potential to make money. And because the metaverse is still in its early stages, there are serious opportunities for M&A, as big tech firms are eager to snap up smaller innovative companies, especially on a global level, which means more cross-border M&A deals could happen.

It is important to point out that the metaverse still holds many unanswered questions as its definition evolves, most of which are technical. Computing power and heat dissipation are issues, as well as creating lightweight and comfortable devices. There are also more human issues, such as the effects of too much VR use on the brain and eyes, the need for human contact, and the social acceptance of wearing VR headsets in everyday public life. The bottom line is that, judging by the levels of investment that the space is attracting, the metaverse appears to be here to stay, and is just getting started.

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com

Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com

Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com

ABOUT BENCHMARK INTERNATIONAL

Benchmark International is a global M&A firm that provides business owners with creative, value-maximizing solutions for growing and exiting their businesses. Benchmark International has handled over $8.25 billion in transaction value across various industries from offices across the world. With decades of M&A experience, Benchmark International’s transaction teams have assisted business owners with achieving their objectives and ensuring the continued growth of their businesses. The firm has also been named the Investment Banking Firm of the Year by The M&A Advisor and the #1 Sell-side, Privately Owned M&A Advisor in the World by Pitchbook’s Global League Tables.

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