Private equity firm’s Sonic sale of £23m turnover gaming firm
THE £23m turnover videogame firm behind Sonic & Sega All Star Racing and Little Big Planet 3 has been sold by NorthEdge Capital to fellow private equity firm Perwyn.
Sumo, which is headquartered in Sheffield, works with top tier publishers including Sony and Microsoft, producing AAA franchises including Little Big Planet 3, Forza Horizon 2 (Xbox 360) and Disney Infinity 3.0, which have sold millions of copies worldwide.
It is currently working on Crackdown 3 with Microsoft, a title designed to redefine open world gaming, and was recently announced as Koch Media’s partner on Dead Island 2.
The transaction is NorthEdge’s second exit of 2016 following the IPO of Accrol Group and represents a 4.4x return on investment for NorthEdge Capital Fund I in less than two years, generating an IRR of 127%.
In November 2014, NorthEdge supported the management team, led by chief executive Carl Cavers, in acquiring the business from US-based Foundation9.
Following the MBO, Sumo has increased headcount from 240 to 350 across its UK and India offices and in March 2016 launched a new Nottingham studio. Since the investment from NorthEdge, revenues have increased by 60% to £23m.
Carl Cavers, chief executive at Sumo Digital, said: “NorthEdge has been an excellent partner for Sumo, supporting the business with both capital and expertise to help us achieve our growth ambitions. Their proximity and local decision making has been a great advantage given the pace at which we have evolved.
“The launch of our new Nottingham studio has enabled us to attract some world class talent and the investment into our India operation has broadened the expertise of the local team to include software engineering as well as art content.
“Our people are at the core of everything we do at Sumo and with major projects such as Crackdown 3 and Dead Island 2 under way, it is an exciting time for us. We operate in a high growth, global market and the pace of technological development and the changing ways in which users consume video games present a great opportunity for the business.
“We are delighted to have Perwyn working alongside us as we embark on the next stage of our journey. They have demonstrated a deep understanding of Sumo, our culture and the market in which we operate and we look forward to partnering with them.”
The investment was led by NorthEdge Partner Andy Ball and investment director Phil Frame.
Andy Ball, partner at NorthEdge Capital, said: “Sumo is a great example of a northern business delivering digital services to a global, blue chip client base and it has been a pleasure to work alongside a first class management team during a very exciting growth period.
“The business has developed into a genuine market leader and the quality of the current project pipeline is testament to the creative and technical expertise of its people. We are delighted to have been a part of the journey so far and look forward to seeing Sumo continue its development in partnership with Perwyn.”
KPMG provided corporate finance advice to NorthEdge. Legal advice was provided by Addleshaw Goddard and Sheridans. PwC provided financial and commercial due diligence. Perwyn was advised by PwC (tax) and Ashfords (legal). Senior debt was provided by Yorkshire Bank’s specialist and acquisition finance team.
