Sheffield video game developer sold by NorthEdge Capital

Sumo Digital, the Sheffield-based video game developer, has been sold to private investment firm Perwyn.

This transaction marks the second exit for NorthEdge Capital, the private equity firm focused on the North of England, this year following the IPO of Accrol Group Holdings.

It also represents a 4.4x return on investment for NorthEdge Capital Fund I in less than two years, generating an IRR of 127%.

Working in partnership with publishers such as Sony and Microsoft, Sumo Digital produces AAA franchises including Little Big Planet 3, Forza Horizon 2 (Xbox 360) and Disney Infinity 3.0, which have sold millions of copies worldwide.

Sumo is currently working on Crackdown 3 with Microsoft, a game designed to redefine open world gaming, and was recently announced as Koch Media’s partner on Dead Island 2.

In November 2014, NorthEdge supported the management team, led by CEO Carl Cavers, in acquiring Sumo 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.

NorthEdge’s investment have resulted in revenues increasing by 60% to £23m. 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.”

Carl Cavers, CEO at Sumo Digital, added: “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.”

Andrew Wynn, Partner at Perwyn, also commented: “Perwyn is delighted to be partnering with Sumo and its exceptional management team led by co-founder Carl Cavers, to support the next stage in its growth. We believe there are significant opportunities ahead for Sumo as a leading independent games developer in a growing, global market place including the potential to apply the team’s substantial creative and technical capabilities to new titles and IP development.

“Perwyn has been particularly impressed with Sumo’s deep, long-standing customer partnerships through which it is able to add significant value to publisher IP, as illustrated by a track-record of contributing to highly-rated releases. We look forward to supporting Sumo on its path to becoming a worldwide leader in video game development and at the heart of the burgeoning UK marketplace.”

KPMG (Christian Mayo, Graham Pearce, Stephen Leah and Mick Morris) provided corporate finance advice to NorthEdge. Legal advice was provided by Addleshaw Goddard (Yunus Seedat, Neville Moore and Luke Aylett) and Sheridans (Sara Wax and Alex Chapman).

PwC provided financial and commercial due diligence (Will Oxley, Nick George and Andrew Baldwin). Perwyn was advised by PwC (tax) and Ashfords (legal). Senior debt was provided by Yorkshire Bank’s specialist and acquisition finance team (Mike Selina, Charlie Barker and Mark Dobson).

Christian Mayo, head of corporate finance for KPMG in Yorkshire, said: “The video gaming sector is the fastest growing area of the media and entertainment industry. This distinction makes it highly sought after and we’re seeing a healthy pipeline of private equity interest in related-businesses across the region.

“Video game development in the console gaming market has a strong heritage across Sheffield and the wider South Yorkshire region, providing employment to thousands of skilled workers. Firms, including Sumo Digital, work closely with local universities and colleges to develop specialist courses and build a talent pool that will encourage investment from the world’s largest brands.”