Kahoot Goes Private in $2bn Deal

Kahoot, the popular mobile quiz game, has announced that it will go private in an all-cash private equity deal worth a reported $2bn. The deal, financed by Goldman Sachs and General Atlantic, aims to end Kahoot’s recent struggles on the stock market. Despite not being the first game that comes to mind when thinking of mobile gaming, Kahoot has proven to be a major hit, especially during the Covid-19 pandemic when remote learning became the norm.

Kahoot’s share price has halved since September 2021, prompting General Atlantic to acquire a 15% stake in the company from SB Northstar, a now-defunct hedge fund owned by SoftBank. This decision to take Kahoot private raises questions about the state of the mobile market and the merger and acquisition (M&A) activity in related sectors. Kahoot previously engaged in an acquisition spree, acquiring mobile game developers such as Drops.

An Endorsement or Capitulation?

While Kahoot has undeniable appeal and utility, particularly in educational settings, its educational nature may prove to be a hindrance. Unlike other games like the Jackbox series, which allow for easy party games by connecting players’ phones to a console or PC, Kahoot’s focus on quizzes may limit its appeal. This is evident in the drop in its share price post-Covid, a trend experienced by many mobile publishers and developers. Additionally, there has been a surge in M&A activity in the industry, such as Rovio being acquired by Sega. Taking Kahoot private seems to be an effort to shield this niche game and edtech group from the volatility of the stock market.

Although some game-related companies have experienced significant stock boosts, these are primarily the larger players in the industry. For example, EA’s stock rose by 4.6% following the news of Microsoft’s successful acquisition of Activision Blizzard, which had faced a legal challenge by the Federal Trade Commission (FTC).

Capturing the Ubiquity of Mobile Devices

Kahoot’s unique multiplayer features, which are rarely seen in the industry, have the potential to capitalize on the widespread use of mobile devices. However, the decision by Sachs and Atlantic to take the company private suggests a belief that this format will remain niche and limited to educational establishments in the near future.