Advisory Fee Dynamics and Investment Bank Influence in Private Equity Gaming Takeovers: A Long-Term Value Creation Analysis

The gaming industry has emerged as a prime target for private equity (PE) firms, driven by its resilient revenue streams, digital transformation, and the allure of scalable intellectual property (IP). As PE activity in gaming accelerates, the role of investment banks in structuring deals and the fee models underpinning their advisory services have become critical factors in evaluating long-term value creation. This analysis explores how advisory fee structures-particularly retainer and success fees-shape investment bank strategies and influence the outcomes of high-stakes gaming industry takeovers.

The Rise of Private Equity in Gaming: A Strategic Shift

Private equity's involvement in gaming has evolved from niche investments to large-scale platform-building, with over $21 billion deployed across 68 deals since 2018, according to InvestGame. Firms like Savvy Games Group, backed by Saudi Arabia's Public Investment Fund (PIF), have exemplified this trend through megadeals such as the $4.9 billion acquisition of Scopely and the $3.5 billion addition of Niantic, as reported by InvestGame. These transactions reflect a strategic pivot from traditional leveraged buyout (LBO) models-focused on short-term cost-cutting-to long-term operational integration and IP-driven growth.

Investment banks play a pivotal role in these deals, offering expertise in due diligence, financial structuring, and regulatory navigation. For instance, the $2.31 billion acquisition of Japanese firm Topcon by KKR, reported by The Globe and Mail, underscores the importance of industry-specific knowledge in aligning transactions with long-term investment theses. However, the success of such deals hinges not only on strategic alignment but also on the fee structures that govern the investment banks' incentives.

Advisory Fee Structures: Incentives and Implications

Advisory fees in M&A typically consist of two components: retainer fees (paid upfront) and success fees (tied to deal outcomes). According to InvestGame's 2025 advisory fee report, retainer fees range from $45k to $150k depending on a company's EBITDA, while success fees are often structured as a percentage of enterprise value or fixed amounts. Two primary models dominate: the Lehman formula, where fees decline as deal size increases, and the accelerator formula, where fees rise with deal size, as described in Axial's 2024–2025 M&A fee guide.

The choice of fee structure significantly influences investment bank behavior. For example, the accelerator model incentivizes banks to maximize deal value, aligning their interests with clients' long-term gains. Conversely, the Lehman model may encourage efficiency but could reduce motivation to optimize deal terms. In the gaming sector, where valuations are often tied to intangible assets like IP and user engagement, success fees structured as a percentage of enterprise value may drive banks to prioritize metrics such as recurring revenue streams and live-ops monetization.

Case Study: Fee Models and Value Creation in Gaming Megadeals

While specific fee details for gaming megadeals like Savvy Games Group's Scopely acquisition remain undisclosed, broader industry trends suggest that scaled success fee structures are increasingly adopted for large transactions, according to InvestGame. These models, where fees decrease incrementally with deal size, balance the need for cost control with the incentive to secure favorable terms. For instance, in the EA-PIF $55 billion deal, investment banks likely employed a hybrid approach, combining retainer fees for upfront due diligence with success fees tied to strategic milestones such as IP integration and market expansion, as reported by Gamemakers.

The impact of these fee models on long-term value creation is evident in operational outcomes. A 2025 Simon-Kucher study found that 33% of PE deal teams prioritize operational improvements over financial engineering, emphasizing metrics like EBITDA margin expansion and cash flow generation, as noted in Simon-Kucher's analysis. By aligning advisory fees with these operational goals, investment banks can drive efficiencies in areas such as supply chain optimization and digital distribution, which are critical in the gaming sector.

The Role of Investment Banks in Shaping Corporate Strategy

Investment banks are not merely facilitators of transactions; they actively shape corporate strategy by identifying synergies and mitigating risks. For example, in the $1.3 billion secondary investment by CVC in Dream Games, as reported by InvestGame, banks likely advised on market positioning and diversification strategies to enhance the portfolio company's resilience. Similarly, in the EQT-led $2.8 billion takeover of Keywords Studios, as reported by InvestGame, banks may have emphasized the importance of cross-border IP licensing and regulatory compliance to unlock long-term value.

However, fee structures can also introduce conflicts of interest. A 2025 SSRN study noted that PE general partners (GPs) may overinvest in later-stage deals to maximize fee revenues, even when such investments are unprofitable, as described in the SSRN paper. This dynamic is particularly relevant in gaming, where high-growth expectations can inflate valuations. To mitigate this risk, limited partners (LPs) must scrutinize fee models and ensure alignment with long-term value creation goals.

Conclusion: Balancing Incentives for Sustainable Growth

The gaming industry's appeal to private equity lies in its potential for durable cash flows and strategic scalability. However, the success of these investments depends on the interplay between advisory fee structures and investment bank strategies. Scaled success fees and accelerator models can drive value creation by aligning incentives with operational and financial outcomes, while retainer fees ensure upfront rigor in due diligence.

As the sector evolves, stakeholders must prioritize transparency in fee agreements and adopt data-driven approaches to evaluate performance. For investment banks, this means moving beyond transactional execution to become strategic partners in building resilient gaming platforms. For PE firms, it requires a commitment to long-term value creation over short-term gains-a balance that will define the next era of gaming industry consolidation.