Episode Transcript
[00:00:01] Speaker A: Welcome to the Dealmaker Uncut podcast, where we speak to some of the UK's most exciting entrepreneurs and hear their investment journeys. We'll discuss the challenges, successes and lessons they've learned along the way with expert deals commentary from Jonathan Boyers, head of Alvarez and Marcel Corporate Finance, and me, Chris McGuire, executive editor at Business Cloud. Welcome everyone to the latest episode of the Dealmaker Uncut podcast, powered by Alvarez and Marcel. My name is Chris McGuire and I'm the executive editor of Business Cloud. As always, I'm joined by the Dealmaker himself, Jonathan Boyers. Jonathan's been involved in deals totaling 5 billion during his long and illustrious career, and he's a managing director and head of Alvarez and Marcel's corporate finance practice in the uk. A big welcome to you, Jonathan. Thanks, Chris, and congratulations as well. Not only are we congratulating the fact that you're now a grandfather, but the podcast is number six in the podcast charts.
[00:00:53] Speaker B: Yeah. Great news, great news.
[00:00:55] Speaker A: Now, before we introduce our guest, a quick shout out to WattMedia who produce the Dealmaker Uncut podcast. They are the kings and queens of video creation and we're delighted to be working with them today. We've got a live audience as well, which is very exciting. Now, the listener stats, the Dealmaker Uncut podcast have been off the scale. We've got listeners all over the world and we're very, very grateful to both of them. So thank you to you. Now, in the first part of today's show, we're going to be interviewing our very, very special guest. And then we're going to have a little break and then we're going to be in part two asking Jonathan some questions based on his 35 years of working in corporate finance. And he'll be answering your questions as well. So, Jonathan, let's put the listeners out of their misery, their collective misery. Who are we speaking to today?
[00:01:39] Speaker B: Thanks, Chris. Well, we're going to be talking to Paul Gouge, who is the CEO and co founder of 4th Star, and we've just been discussing that he spent most a large part of his life, like me, in Wigan, his previous business. And this is a going to be a really interesting discussion. Playdemic was bought by EA in 2021 for $1.4 billion. And I'm really looking forward to talking about the story. So welcome, Paul.
[00:02:09] Speaker C: Thanks, Jonathan. Thanks for having me.
[00:02:11] Speaker A: Thanks, Chris. Paul, I think you can tell that me and Jonathan are a couple of gamers ourselves. Absolutely. Yeah.
[00:02:17] Speaker C: I thought that when I came in. Here's two gamers.
[00:02:19] Speaker A: I still Love Pac Man. But what we're going to do, I'm going take you back to the beginning, just talk about your early life and then Jonathan's going to come in and start talking about some of your deals as well. So your fourth business is, is fourth star. In every case, your business partner has been Alex. Alex Rigby. Now there's quite an unusual story, isn't there, about how you two came together very early on in life?
[00:02:40] Speaker C: Yes, we did, yeah. I met Alex, I think, I think I was 8. So I moved opposite him on a road in Writington, which is near Wigan, called Mossley Road. Jonathan might know it. Yeah, I used to live next door to Lassell House, if you remember that. And Alex lived across the road and yeah, his mum was super friendly and I remember she came over and sort of knocked on the door and said, you know, hi, welcome, welcome to the neighborhood. And here's my son Alex, he's similar age to you. And we literally hit it off, you know, Alex and I became friends from that moment and we spent a huge amount of time together growing up. He was a couple of years older than me, so we weren't always in the same year at school, but we went to the same schools and apart from a short period when he went off to art school, I went off to university. He then went to work for a video game company, I went to work for an investment bank and during that period we didn't work together, but that was probably in total three years. Other than that, we spent pretty much our whole lives together, which is, I think quite unusual actually. And I don't know what it says about us, but I think it reflects a great friendship. There's probably something strange about it, but as far as we're concerned, it's been brilliant for us.
[00:03:43] Speaker A: I think it's great because, I mean, you know, I'm not giving anything away. You're 48 now, you met him at 8. He's, he's 50. So you know, 40 years of your life, it's a while you spend more time with him than your family. So. So you and Alex have been working together for four decades. You've produced some of the world's biggest mobile games, including the BAFTA winning Gold Clash, which we'll talk about. You created a tech unicorn in Playdemic, means you had a valuation of over a billion US dollars. And I'm fascinated to know why you think the north is such a gaming powerhouse.
[00:04:11] Speaker C: Yeah, I think it's, it's interesting. I think the north has historically, as you rightly say, been, you know, a very important part of the country for gaming. And I think, you know, really, when you look at the north, the north has a really incredible creative past. You know, there's so much that comes out of the north, out of Livepool, out of Manchester, out of Yorkshire. You know, when you think about music, you think about television, you think about the great writers. And I think it shouldn't, in that sense, shouldn't really come as a surprise. I'm always, if I'm honest, I'm always a little bit stung by anybody. And, you know, Chris, you're a southerner masquerading as a northerner. But I'm always a little bit stung by anybody who says, oh, you know, it's happening up north, as if, you know, it's a mystery why incredible things happen up north. I think there's incredible talent here, there's incredible energy here, and really a lot.
[00:04:53] Speaker A: Of rain here as well.
[00:04:54] Speaker C: A lot of rain.
[00:04:55] Speaker A: Alex said.
[00:04:55] Speaker C: Yeah, Alex has his thesis, which I heard it for the first time when he said it to you, which is that the reason that north is a very creative is because it rains so much and you have to stay in the house and do interesting things. Now, there may well be some truth in that. I'm not sure there's scientific evidence to support that argument, but there may well be some truth in that. But I think, you know, there is. We have a problem in this country more generally that, you know, London is this incredible sort of island state that does so much of the economic work for this country and as a consequence sucks in so much capital, so many, so much human capital, so much attention, and actually with a lot of work still to do to change that, I think, you know, shining a spotlight on the great things that happen outside of London, whether it's in the north of west of England or in the southwest of England or in Scotland or wherever it is, is really important. And I think the Northwest deserves recognition for being a great center of video games and frankly, lots of other things as well.
[00:05:47] Speaker B: Music, to my ears.
[00:05:48] Speaker A: He loves music, incidentally.
[00:05:50] Speaker B: Oh, good. So you launched your first mobile game studio in 1999 with Battle Mail, which you ultimately sold to m former. And then you then went straight on and built a second business, Rockpool Games, and then you sold that business. So it might just be worth talking a little bit about how that got to you, that first period of your business career. Just. Yeah, love to hear a bit more.
[00:06:20] Speaker C: Yeah, I think. I mean, I certainly always wanted to be an entrepreneur. I was one of those annoying kids. I know it's really cool now to be entrepreneur, everyone's been entrepreneur, but I think it was less so, you know, some time ago.
And I had this real sense, I think it was probably an annoying sense to lots of other people that I just didn't like being told what to do. So I really wanted to try and control my own destiny and. And I had this real sense of impatience and I think Alex had it as well, but I think I probably badgered him quite a lot to sort of come along in the early days. But we really wanted to try and do things that were interesting even when we were young. So we had. Our first business was a magazine. We wrote a fanzine for video games called Spec Ace and it had this very elaborate pyramid selling scheme buried inside it as well. So we did that for a while whilst we're at university, we ran a company that made interactive prospectuses for other colleges and universities. So at the time, and everyone who's watching this in the room, this won't be an ending to them, but to us it will. At the time, universities had these incredible perspectives of these massive tome documents. They were like the old Grantham's catalogue and there's a huge amount of work that went into preparing these things and they were inevitably out of date the moment they were printed because something had changed on a course or a curriculum. So this was the early days of the late 90s, it was the early days of CD Rom. So we started a business whilst we're at university convincing universities that they should go on CD ROM for their prospectuses and that's what young people wanted to access at that point. So we'd had that business as well and that made us some money and paid us through university. Bought my first car with that and in fact my first Internet connected computer came that way and so I had that sort of energy already and want to do that and I did economics at Manchester University and I got my first job probably through somebody you know, do you remember Kevin Wilson? So Kevin Wilson was a family friend of ours and, and he said to me, look Paul, you really need to go into banking. At the time he was at NatWest Markets and I did some work experience with him and then he went to Albert E Sharp, as you probably remember. I remember. So I, I did economics and he hired me into Albert Sharp and then Albert Sharp got a club, El Mu and I ended up mutual for a few years in corporate finance and I kind of was really interested in it, I loved it and I sort of got this real buzz out of deal making, but I had this really strong sense that I was the wrong side of the table, that we were doing late 90s, we were doing lots of dot com deals, I'm sure you remember some crazy valuations.
[00:08:34] Speaker B: And it all burst in about 2001.
[00:08:37] Speaker C: It did, yeah. And it was bonkers. But also what was interesting for me, and it's one of those moments in time, is that people coming in to raise capital, we were raising capital, floating businesses.
Often the CEO was not that much older than I was, in my sort of early 20s, so I thought, there's an opportunity here, there's a moment in time. And so battlemail was really born out of me wanting to leave my corporate finance job and start a dot com business. I was obviously interested in video games, Alex was interested in video games. But really the idea behind Battle Mail was to create a virally distributed piece of content that wouldn't require the marketing expenditure that seemed to be the case at the time that was driving those business models. You'll probably remember this, that there was a very simplistic formula that said if I, if I raise £40 million, I can go and buy 20 million users and then the 20 million users are times a metric, means that my business is now worth 100 million. So you could arbitrage that marketing spend, which was all bonkers. It was all kind of. It was all a, you know, pyramid scheme, but. But ultimately it seemed to work on this belief that at some point in time you'd be able to monetize those users. So I thought if you could take out the marketing spend, then you've got a business that will be worth that on its merits. And that was where BattleMail came. BattleMail was a virally distributed play by email video game. And that's where it started. So that was the journey into Battle Mail.
[00:09:54] Speaker B: So can I just ask, do you think that what you learned in those first few years in investment banking was relevant to what you then went on to do? Or could you have gone straight from university into. Or did you need to do that time?
[00:10:09] Speaker C: I think it was certainly relevant in lots of areas. So it equipped me with a language and an approach that meant I could have conversations with people like you could raise capital, could talk in a way that at the time, lots of young people didn't. I'm always surprised. I do some seed investing now and always surprised when I sort of meet young investors, they've got all the lingo, you know, they know all about. This is my Seed round. This is my pre. Seed round. This is my Series A. Back then, I didn't know any of that stuff and I only learned it through sort of, you know, being in the trade. And I think, you know, when I was starting out, it did give me a competitive advantage because I. I did know how all that was put together, you know, both the reality of it and the perception of it. So that was helpful.
I think. Obviously, there's a huge part of running a business that you don't get from, from corporate finance, but I think certainly understanding the key metrics, understanding what drives value, understanding what investors are looking for and the language that they speak was really, really helpful in my career.
[00:11:03] Speaker B: And was. Was Alex doing something relevant to the publishing business or.
[00:11:09] Speaker C: Yeah, he was, yeah. So he'd. He'd gone to Plymouth and to art school in Plymouth, and he'd always wanted video games. So he left there once he graduated and went to work for a video game company in Leamington. So when we started Bath and Mail, I literally called him up and said, I've got this brilliant idea. What do you think?
And I knew that he was the best arbiter of that idea because he was in the industry already and he would be able to give me a really honest feedback on whether he thought it was good because ultimately he knew the next question was going to be, and you now need to leave your job and come and do it with me. So that's where he started with me in Battle Mail.
[00:11:44] Speaker B: Okay.
[00:11:44] Speaker A: You're not thinking about a career as a gamer, are you?
[00:11:46] Speaker B: No, no, not yet.
So 2009, you launched your third studio, which was the one that was to become the big one, playdemic, and that ultimately hit the jackpot with Golf Clash. But there are also Candy Crush, Clash of the Clans, were making a billion dollars revenue a year.
So I'm interested in your thought process as you were building that business and particularly leading up to the decision to sell it.
[00:12:17] Speaker C: Yeah, well, there's lots that happen in that period and I think, I mean, the games industry has lots of different elements to it, and I think sometimes the games industry isn't very well understood outside the games industry. And I think it's. I think that's partly down to us in the games industry. We're not very good at talking about ourselves. We're not very good at sort of communicating outside our industry. So a lot of people don't really understand the nuanced differences between different games companies and the different part they play in the value chain. But to Start answering that question. One of the big differences was that Rockpool was primarily a work for hire developers. That meant that we were building video games to order. So we had big clients like Sega, EA was a client, Codemasters, these other big games publishers. And we were pitching for work, winning that work and developing video games for them. So in lots of senses it was a software contracting business and lots of video companies are still that today. So there's a. I suppose one of the biggest that was sold in this country is a business called Sumo that was. There's sort of a very large software contracting business, great business, run by a good friend of mine, but markedly different to what we wanted to create with playdemic. So if you think about the big value drivers in video games today, they are the big franchises, they are the FIFA's, they are the Call of Duties, they are the Fortnites, these incredible IPs that can drive huge amounts of free cash flow over many, many years. So with playdemic, that's where we wanted to get. And I always see that as the top of the value chain really in video games. You want to be able to be the owner and service provider, provider on those big IPs.
[00:13:45] Speaker A: You want to create your own game.
[00:13:47] Speaker C: You want to. Yes. Am I using too much jargon? Yes.
[00:13:49] Speaker B: Well, you were creating games for other people and this time you're creating it to own yourself.
[00:13:54] Speaker C: Yes. Yeah, yes, sorry, I'll drop some of that jargon. Yes, you're absolutely right. Correct me there, Chris. We wanted to make our own game and we wanted to deliver that game directly to our players. So a moment in time opened up for us to do that, which was that actually in Facebook. So for even then, going back to 2010, it was very difficult, very capital intensive for a small studio like ours to potentially play on that playing field and think about creating our own game and distributing it. That would have taken a huge amount of capital, but there was an opportunity, and that was with Facebook. So as Facebook exploded, Mark Zuckerberg made this decision that he wanted to open the platform up to third party development. And like so many times in history of technology, that one of the very first industries to jump on that was video games. It's normally porn and video games that sort of rush into technology vacuums. And there's not a lot in common between those two, by the way, but they just happened to be there. And. And so lots of video game creators jumped on Facebook as a gaming, as a service platform, as a way to distribute content that they could own and make and distribute it through this incredible resource. Millions and millions and millions of active players that you could get access to relatively cheaply through Facebook. So we saw that opportunity and we said, look, that's where we should go. We should start building video games on Facebook that we can distribute directly to consumers. And that's how we all get our big game. So that's where we started. And we weren't alone in that. That very quickly became a big point of interest. In fact, we were probably a year or so later than a lot of the early entrants to that market.
But we were pretty successful. We built in that world. Your key metric really is how many daily active players do you have? And there's this sort of threshold that says if you have more than a million, then you're doing really well. And we were very fortunate. We were able to build two games that had a million daily active players.
What then happened was that in a stroke of absolute genius from Steve Jobs, we saw the advent of not only the App Store being created. So you sort of have the iPhone happening in 2007, 2008, really for most of us, even though it was announced 2007, you then have the App Store 2009. But what happens around my memory may deceive me here, but around 2010, 2011 is in app purchasing. And what in app purchasing allows you to do is buy microtransaction payments in software. And that was revolutionary. And what suddenly happened is when the iPhone massively grew, as we all know that everyone's aware of that story, a massive explosion, it changed the world forever. But also we saw video games coming into that market very quickly. And what was initially happening is they were paid to download games. So you think about things like Angry Birds, for example, which one of the big, interestingly kind of a northwest success story, you know, Joe and Chris at Chillingo, that was they didn't make that game, but they published that game. You know, they had an office in Macclesfield and the north hitting there again. But what was interesting is that with the advent of in app purchasing, that model pivoted away from what we call premium download. So pay to download and that's all you're ever going to pay to service based gaming. So suddenly I could download the software for free and then I would pay on an ongoing basis.
[00:17:05] Speaker B: The quality of earnings suddenly improved quite significantly.
[00:17:08] Speaker C: Absolutely. Spoken like a true corporate financier. Yes, absolutely. 100%, Jonathan. And I think that what we saw happening on Facebook very quickly started to move to mobile. So then we had to pivot with it. So we went to Movile, we took one of our Facebook games to mobile, paused it then and saw a lot more success. So that was really the journey of where we were going and it was a technology and those platforms that enabled us to go in that direction.
[00:17:33] Speaker B: Yeah. So you'd had success in the earlier businesses, but this one. But you must have been able to realize that actually the value of the business was growing quite significantly and you were starting to achieve the objectives that you thought about.
You ended up selling that business. And I'm interested in a. The decision to sell because you will have been able to see growth, the sector was in growth and when was the right time to sell and who to sell it to. And just I'm interested in how the decision and how that the, the approach, the run up to that deal.
[00:18:08] Speaker C: Yeah.
[00:18:08] Speaker A: And whilst at the same time you deal to Warner Brothers, you've got this game that you think might be the big one.
[00:18:14] Speaker C: Yes.
[00:18:14] Speaker A: Do you. To sell or not to sell? That was the question.
[00:18:17] Speaker C: It was, yeah. The Shakespearean perspective. Yeah, that was. So I think there's a few elements of this decision making process that will happen simultaneously. So it's probably worth mentioning two of them. One was that despite everything I've just said about the markets, like a lot of low friction, high scaled growth markets in digital and online, actually that market was rapidly king making. And I think it's one of the incredible conundrums of the digital age is that I think when we first started to see the Internet happen In the late 90s, we all thought it was this great democratizing force. And actually I think if you look at it through the lens of 2025, what it's actually done is create a lot of monopolies, lots of very, very large and very powerful companies and there's often only one market leader in each segment that's really worth talking about. And I think we've started to see that happen in games and in free to play service games on the App Store and Google Play.
So we were at this point where we were successful, but because we have quite a high bar of success, we weren't materially more successful than we had been in our previous company. And by that I'm measuring it in terms of revenues and profits.
[00:19:25] Speaker B: But you own the assets.
[00:19:27] Speaker C: But we own the assets. Yeah, we did. And so in that sense, again, I'll go back to the impatient entrepreneur. We were starting to get a little bit frustrated. We thought we've been at this now for Seven years we've had a level of success, but we're nothing like the level of success that the people we want to be are experiencing. There are companies out there. There's one company in particular called supercell, that's still an amazing company today. Operates out of Helsinki.
Ilke Pannin, who's the CEO, been on a very. I often say Ilka's like the successful version of me because he sort of did everything that I'd done, but better.
And he'd built this incredible business that subsequently went on to worth over $10 billion. And we were looking enviously at his success and the success of King with Candy Crusher, you mentioned earlier, and others, and starting to wonder whether the music was over. That actually all the winners have been declared and the old kind of market conditions of the big boys at the top locking in success are starting to emerge again. Now, I. That was a narrative that was being played out in our industry. That's not just us being negative. You know, I was talking to VC friends of mine from other people in the industry, and they were saying, look, Paul, you know, it's kind of done. You know, it's. You know, Candy Crush is up there. You know, Clash of Clans is up there. Heyday's up there. That'll take you to listen to corporate financiers. Well, you know what, it's funny. And I was receptive to that because it sort of fitted a narrative that I had that we weren't growing. We grown very quickly, but we weren't growing aggressively from the point that we'd reached. Now, what I would say to anybody now who's in that position is really take time to look inward rather than outward. And I think what we didn't do is really examine all the hard work. And I think the problem a little bit with these kind of conversations, it makes it sound like Paul did everything. Now, obviously, as we know, in companies, the CEO plays sometimes a very small part in success. We had an incredible team, and that team had done huge amounts of hard work over the preceding seven years in every area in technology and culture, in our approach, in our strategy. We were a really great business, but we didn't really see how good we were. Now, actually, as Chris rightly said, all of that hard work and energy and strategy and technology was about to come to fruition in a product that we had in development, and that was a game called Golf Clash. Now, we've been approached by Warner at the start of 2016 to do a deal and to have a transaction with them and we were flattered by that, hugely flattered by that. They had a great business already in the north in Traveller's Tales and TT Games and so there were people on the ground here that we could talk to and we respected that, had a huge success and we could see a real role inside of Warner for ourselves. So we were excited by that. But at the same time it wasn't as exciting as this game golf crash becoming a successful. So like everything in life, we had a perfect way this was going to play out. We were going to carry on our conversations, our deal making, which again, you know, lots and lots about at the same time try and get this product out. So we would. We were hedging our bets. Let's have this corporate negotiation about transaction but at the same time let's get this product out. Because if this product sells and is the hit that we hope it will be, then this isn't a great deal for us. But if it bombs, this is a great deal for us. So let's try and have our cake and eat it now.
[00:22:45] Speaker A: Do you see that a lot in your line of work, Jonathan, where people are thinking about selling their business but they might be working on something, they might have some IP which could massively transform the value of that business.
[00:22:56] Speaker B: It's very common that. I mean timing's everything in deals. I mean that's one of the. Everyone knows that often people are coming, they think they might be on the verge of a significant uptick in trading.
It's not often as stark as this particular example though. And like I say, I'm really interested in this bit of the thought process and particularly how you were engaging with Warner as a buyer when you were facing that question.
[00:23:29] Speaker C: Yeah, and I think that engagement is interesting because again, as you'll know from your experience, when there's a very big power differential, which of course there is, you know, you WarnerMedia, biggest media business in the west, you know, huge, huge conglomeration and little old blade Emmick in Wilmslow. There's a massive disparity in power there. So they obviously, you know, were calling all the shots and our job was really, or my job was really to just to try and see if we get there because I think we had a sense that, to your point, that the difference could be stark. You know, this thing worked because the nature of our industry, it is somewhat boom and bust and if you have a hit it can be phenomenal. So we tried to run these things all the way and as is the nature of certainly Software development, maybe just business in general. We weren't able to get this product to market in a timeframe that we hoped. We were hoping to launch it in sort of September, October 2016, and we weren't able to achieve that. So as we got to the end of 2016, Warner, quite rightly, was sort of getting deal fatigue. You know, there were lots of lawyers, lots of accountants. You know, everyone was on this deal. They'd been on it for a long time. And you all have had this situation before where everyone practically gets a bit fed up with it. You know, they just want to get it done. It's either going to happen or it's not going to happen. Yeah, and we had that conversation, you know, either we get this done for Christmas, guys, or we're not going to do it. And they'd also got the sense that we were dragging our heels a bit, so they just wanted to either do the deal or move on. So we really wrestled with that. And, you know, I think I spoke to a very good mentor of mine, a guy called Tim Morris, who's also a great friend, and he said to me, look, Paul, the most important thing you do here is you make a good decision. And a good decision is not necessarily the decision that has the best outcome. It's a decision that you take thoughtfully and carefully. And as long as you take a decision thoughtfully and carefully, then it is a good decision. It may not be the outcome you want, but you can certainly live with the idea that you made a good decision. It's not reckless, it's not in the moment. So we thought and thought and thought about it, and I did some sort of research and found this very simple little game theory way of sort of trying to analyze and frame the decision. And it was to say, if we looked at two outcomes, outcome number one would be, we sell this company to Warner Brothers and golfclash becomes a hit.
What does that look like? Now, we had quite a big earn out in this transaction, so we would capture a bit of that value or it turns out a bit. But at the time we thought quite a lot of that value. And then the second outcome is, if we don't sell to Warner and Golf Crash is a mission, then what happens to us? How do we feel about that? And so, you know, you look at the best and worst outcomes of both those decisions, and we concluded that, of course, the best outcome really is to sell to Warner, because even if this game is a hit, we'll capture some of that value. And frankly, it's a lot Better than the worst outcome of that.
[00:26:20] Speaker B: But essentially you were thinking that if all I get is the money without the earn out, it's still a good enough deal.
[00:26:27] Speaker C: It's still a good deal. Yeah.
[00:26:29] Speaker B: And then there is an earn out and if, if I get the full amount of earn out that that's great.
[00:26:33] Speaker C: Yeah.
[00:26:34] Speaker B: And if then it goes on to be even better then you know, still got a great deal. But that was the thinking.
[00:26:41] Speaker C: But yeah, that was the thinking and as you sort of already know, we had no idea of the scale of the difference here. You know Golf Clash we sold. We actually signed the Spa on the 23rd of December. We ended up launching Golf Clash on the 16th of January and it absolutely flew in a way that we couldn't possibly have antic.
[00:27:00] Speaker A: No difference in figures in terms of our term. You know the numbers. In terms of how it took off.
[00:27:06] Speaker C: Yeah, well it was. I mean in terms of where it is today, I mean gov Crash is, you know has done over 1.4 billion of revenue.
It's been downloaded close to probably 200 million times now and you know it's a super profitable product. You know I, some of these numbers are burned into my, into my, my brain. But we, we made 42 and a half million in 2017. We made 87 million in you know this is pre tax profit. 87 million in 2018 and over 100 million by 2019 and we stayed over 100 million until we sold the business. So it was phenomenally cash generative and you know it was a huge success and I'm super proud despite obviously we're focusing on the transaction here which is obviously really important for shareholder value but in terms of being proud of it, you know, if you park that I was super proud of what the team achieved.
[00:27:57] Speaker B: So yeah, totally. I mean it's a phenomenal success story, isn't it? Yeah and I'm interested in the. Because one of the things when people are doing deals is, you know you sell the business is to make how, how the buyer incentivizes the management team that they've acquired to continue to grow. And there was an earn out.
[00:28:16] Speaker C: Yes.
[00:28:17] Speaker B: And that was smashed.
[00:28:18] Speaker C: It was ends of it. Yeah.
[00:28:20] Speaker B: So I'm interested in how they motivated you to carry on when the business was going stratospheric and you know the, the incentives presumably had been left.
How did they do that?
[00:28:33] Speaker C: Yeah, that's a great question I think and it's. I think Warner deserve a lot of credit in this as well. So really for us and I'll Be completely honest here. It was quite a psychological challenge. You know, if you're an entrepreneur and you're trying to build successful businesses and just on the precipice of huge success, you hand the keys to somebody else, you know that. That's quite a challenging thing to process.
[00:28:55] Speaker B: But you're still driving the business 100%.
[00:28:58] Speaker C: Yeah, the business was completely run operationally independently from Warner. I often used to joke with my bosses over in Los Angeles, they didn't give us a single cent of working capital. They need to. But, you know, my point was that, you know, you've done nothing to justify this growth. It was entirely out of Wilmslow. But I think what was, what was difficult for a while is just processing that on a human level. Just kind of processing how what we'd done.
[00:29:22] Speaker A: And one question, one question, if I may. And incidentally, Paul and Alex are probably two of the nicest people you'll ever meet. But if you do want to annoy him, ask them whether or not Golf Clash is the Chesney Hawks of gaming because they've produced a number of other big games as well. But. But that's one that got the attention. Was there ever a moment when you're sitting down with your wife having a glass of red and you just earn this life changing amount of money and all you can think of is like, I've let the big one get away. And you really, really. I'm not gonna swear because we don't swear. Really miffed. Was there ever an element of that?
[00:29:56] Speaker C: Yeah, yeah. And my wife's brilliant for this, you know, she's wonderfully unmaterialistic and has a much better sense of what's important in life than I ever have. And so I remember on two occasions actually, it first happened with RF actually in 2007. So we'd sold Rockpool and I was living in London then.
[00:30:14] Speaker A: That was 15 million, wasn't it?
[00:30:16] Speaker C: Yes, it was. And we'd sold Rockpool and we lived in Putney in southwest London. We went for a walk in Richmond park, which wasn't very far away, and it all closed. And the money had been deposited in our bank accounts. And I had Face Like Thunder and she kind of looked at me and went, what the hell's wrong with you? I said, you know what? I've just glimpsed the disappointment of this. And she looked at me like, oh my God, am I married to this man? But I think she instantly sort of understood what I was referring to. And I think for me, in that moment, I'd realized it actually really wasn't about the money, it was actually about. And there's a danger here of getting into cliche territory, but I'd actually enjoyed the journey and the freedom and the control so much that sending that over and exchanging it for cash wasn't actually, at that point, immediately a fair transaction. I mean, it was. It was fair value for the company, but as far as it pertained to my life, it didn't really necessarily feel like the right thing to do. And I think when this happened with, you know, to Chris's question, when this happened with playdemic, you know, I came home again with a face similarly like thunder, and she's like, you know, what's wrong with you? Well, you know, this has happened. And she said something to me which will always live with me. She said, you know what, Paul? That's the best thing that's ever happened to us. I said, really? And she said, yeah, just. Just imagine for a second that you and I had sort of, you know, I was the majority shareholder in that business. You know, 1.4 billion of cash, 300 million of at least 400 million free cash flow that we would have been able to take out. You know, we kept independent. That would have been in the bank. We'd be able to withdraw that as well as the 1.4 billion of cash. He said, that would have ruined our lives. You know, if you. If you had accumulated all of that capital, it would have changed everything. And I don't want our lives to change. And you know what? That was really powerful for me. I mean, she's clearly wrong, but. No, but it was really powerful. And I think that was a really important moment.
[00:32:02] Speaker B: One of the things I'm really interested in, generally, is how entrepreneurs who are coming up to the sale and then when they've done the sale, how they feel before, afterwards, and back to this point about being motivated to keep going.
[00:32:15] Speaker C: Yes.
[00:32:15] Speaker B: And we didn't. I think just to. I'm really keen to understand what happened in the relationship with the buyer as this business is going stratospheric.
[00:32:24] Speaker C: Yes.
[00:32:25] Speaker B: How they kept you on side and on board and how you kept motivated so that you felt, you know, you were creating something amazing.
[00:32:32] Speaker C: Yes.
[00:32:32] Speaker B: But I'm really interested in that.
[00:32:34] Speaker C: Yeah. Again, it's a brilliant question and I think it was a crucial move on both parts, both us and Warner. And I said before that Warner deserves some credit, and the reason that they do is that I spent this period of time just genuinely being cross about what happened and then tried to turn that into constructive action. And ultimately that resulted in me traveling to Los Angeles, sitting down with some very senior guys at Warner Brothers and saying look, we need to open up the spa. You know, this, this is no longer going spa. Sorry. Yeah, I keep doing this, don't I? Sorry. Our, our sale agreement. So the contract that governed our sale to Warner Brothers, we need to look at it again. We need to look at this deal again because right now it looks a bit like, you know, you went to a flea stall and accidentally bought a Monet, you know, and we need to try and get this right. And so, and look, you know, again there's some caveats here with they'd already paid us a lot of money. So it's not about the absolute amounts of money but more about, as you say, the incentive and the relative proportions of how that was being shared. And Warner is actually quite an old fashioned film company, a film and television company. So you could be forgiving maybe for thinking that they're sort of, you know, a Silicon Valley style business and they're just not, they're 100 year old film and television company. So they don't necessarily have all the levers that you might expect in a relatively young tech company to do those sort of corporate machinations of quickly doing deals. And to an extent initially the response was well, the deal's a deal, Paul. You knew what you were getting into, you signed the paperwork, everyone into this, no one was under duress, you've sold all your equity, a deal's a deal. But over some time and some help from some other people at Warner, everybody starts to realize that actually there was a massive shared incentive here that if we were motivated to continue to work hard to grow this business, then everyone's going to win here and particularly Warner. So they needed to re incentivize us to, to your point, Jonathan. And so we were able to renegotiate the deal and we did that and we, and we did that in a way quite early on. And I think this is very much their credit but in two senses. One, the actual fact that they did it and secondly, that they were not the kind of organization that did that naturally. And they're bureaucratic, they're huge, you know, huge company. And we all know huge companies aren't great at doing things that are unusual for them and require lots of sign offs and paperwork. But they did and we renegotiated and put in place a new set of structures that would work for us and incentivize not only the original shareholders but Crucially importantly for me as well was our team. We had a very generous bonus scheme and that had motivated my key team for a long time and everyone in the organization and that had gone with the acquisition. So we were able to not put that back in place, but something similar to that back in place, which was also hugely valuable.
[00:35:19] Speaker B: So you talk about that as if it was the renegotiation of a deal, but in reality it was a re incentivization because that was necessary. So it was in their interest to do that.
[00:35:30] Speaker C: Hugely so, yeah, hugely so. But I think it's not necessarily always apparent to people that it is in their interest and it took some time to make sure that everyone understood that and we were able to do that again. So we did that two times in this journey.
And then ultimately, when it came to them wanting to sell and exit the business, we were able to have that conversation again.
[00:35:51] Speaker A: That was 2020. I'm getting a sign from Ellis, the producer. You don't want to get the wrong side of Ellis, but 2021, you did a deal to EA for 1.4 billion. So you were able to benefit, as was your team around you, from that as well, Correct?
[00:36:04] Speaker C: Yeah. And I think because the joy was that we'd already established this principle, you know, we'd established a principle that this was a rocket ship that the initial deal was never going to be able to deal with. And so we'd established principle of two subsequent renegotiations or re incentivizations. So we were able to do that again when it came to sale. And I don't want to make Warner sound too benevolent. I mean, clearly the only way they were going to sell this company, we traded independent. They needed us in it. They needed us to be committed to that process, committed to the sale process, committed to marketing the company and explaining it through the due diligence process, but also agreeing to sort of make sure that it transitioned to a new owner. So there was, you know, there's clearly incentives on both sides and we were able to.
[00:36:45] Speaker B: So you were heavily involved in the onward sale then to ea?
[00:36:49] Speaker C: Correct.
[00:36:49] Speaker B: And then when that had been done, so that had happened. And that was again, another phenomenal outcome for everybody. Where did that leave you then? What happened next?
[00:37:01] Speaker C: Yeah, well, that's. So I think I'd already knew at this point that I'd probably come to the end of my journey at this point working for large multinationals.
It only been four and a half years, but it was already I was craving that independence of being an entrepreneur again. I think frankly, the open mindedness that Warner had given us in terms of incentivization wasn't necessarily on display at ea. So whilst we did very well out of the sale and we had very healthy remuneration packages with ea, it didn't allow me to be entrepreneurial and frankly, there was no real need for an entrepreneurial CEO in the business at that point. So my commitment to this whole process, and I say this from the beginning on the sale process and the renegotiation for the sale was that I didn't want my consideration from the sale to be tied to an ongoing service agreement, ongoing contract, a commitment to work for ea. So I said that that was a condition for me and God bless Warner again, they agreed to that. So the buyers knew that I was going to get paid no matter what, Alex was going to get paid no matter what, and that they were. Then it was up to them to incentivize us to stay. And the shorthand version of this, I've got a huge respect for EA and I think they're an amazing company, but we weren't able to really get to a place that made it make sense for us psychologically, financially or motivationally to stay at that company. So we resigned from Playdemic and just before Christmas of 2021. And then I left in February 22.
[00:38:31] Speaker A: There's two areas I just want to clean up and sort of clear up with you, if I may, before we finish. One was that, you know, it's a bit like that quote from Stephen Redgrave. If you ever see me in a rowing boat again, you can shoot me and then get back in a rowing boat. You sort of. You didn't say that. But then you and you and Alex decided there was still some more petrol in the tank and you went again with your Coen business, which is four star, your fourth gaming studio. And. And what's the. How big is that now? Because I know you raised 10 million.
[00:38:59] Speaker C: Yeah. So it's only 20 people at this point, so it's still quite small and very deliberately. So we're working on trying to make another hit. We're working to try and make another Golf Clash. It won't be like Golf Clash, but we're trying to make another product that's hopefully as successful as.
[00:39:11] Speaker A: I've got an idea for you again. The Dealmaker Uncut Game.
[00:39:15] Speaker B: Oh.
[00:39:15] Speaker A: Starring Jonathan and Chris.
[00:39:16] Speaker C: Sounds like a winner.
[00:39:17] Speaker A: Okay. With Ellis street in the background, how driving skills are legendary.
[00:39:22] Speaker C: But yeah, so we say to your question, Chris, we. I think I thought There'd be quite a bit of time off actually before I did something else. And by time off I don't mean sort of just playing tennis, I meant sort of not being an entrepreneur in a business. So I did quite a bit of seed investments and non exec work. But I think what Alex and I both realized, and in fact to give him credit, Alex more than me in this one, because historically it's often been me sort of driving the want to start companies. And in this case it was really Alex that was feeling it very, very strongly.
And you know, we spent quite a lot of time together over the summer of 2022 and both realized that, you know what, we've got at least one more in us and that we really missed. We weren't getting the satisfaction from seed investment. It wasn't scratching the itch, you know, being a non exec or an advising company just wasn't really getting what we wanted or giving us what we wanted rather. So we just thought, you know what, we've got a set of skills here, we've proven something. I'd be lying if I said there wasn't a little bit of unfinished business as a result of the way this transaction worked. And we said, you know what, let's utilize this, let's go again.
[00:40:26] Speaker B: So it's still the two of you together?
[00:40:28] Speaker C: Yeah.
[00:40:29] Speaker B: And have you brought, are there other people involved that you've worked with for a long time?
[00:40:34] Speaker C: Yes. Yeah.
[00:40:35] Speaker B: You've got a. It's a group that's building something.
[00:40:37] Speaker C: It is, yeah. Of those people, I think it's actually 19 people.
7. There are 16 of those people are all ex platemic people. Some of those people, in fact, my CTO is somebody that I've worked with from the Battlemell days. So we have a number of people. In fact, one of our designers is from the Rockpool days. You know, there's many, many of us have worked together for 20 plus years in our business.
[00:40:57] Speaker B: I think I'd back you to get another one.
[00:41:00] Speaker C: That's very. Well, that's very kind of you, Jonathan.
[00:41:02] Speaker A: He will back. Seriously, as the final question before we go through our interval, you do some engine investment now. I mean, I think typically your sweet spot is about 150,000 to half a million as well. I think you've had about, about 20 investments, haven't you? What's your approach to angel investment? And this is typical of what you see, Jonathan, in terms of entrepreneurs you've exited. Earn some money, then they go into angel investment, don't they?
[00:41:24] Speaker C: Yeah. What's my approach? I think, you know, there's a thing that I call the Alex Ferguson problem, which is just because you're a good manager doesn't mean you're good at picking other managers. And I think, you know, there is a mistake that entrepreneurs made and I've certainly made that if you're successful in operating and exiting a business, you suddenly think you might have some skills to identify other successful companies, companies. And I've learned on a number of occasions that is not necessarily true.
My approach is largely. So I did the period of seed investing after we'd sold the Rockpool business with limited success. I think I came out about net neutral.
[00:41:59] Speaker B: Are these generally gaming related businesses or are they.
[00:42:02] Speaker C: They're generally tech related businesses. Really. Yeah. So I think at times I've not been able to invest in games businesses for different reasons, but so they're generally tech businesses. So I definitely try and get involved in things that I think I've got some experience of, you know, some either direct or adjacent experience. I wouldn't sort of start getting involved in a property development business or something. So from my perspective, the strategy, if there is any at all, is certainly trying to identify people I believe in.
I think that's the single most important thing. I think we also learn that over time that actually nothing goes anywhere without incredible people. Then I really try and test out the thesis around the idea. Do I really believe in this? Do they? Have they done the research? Have they understand this idea's got potential to scale, is interesting? And then finally can I create some economics that make it make sense for me? Is it going to be interesting? And I've made that mistake before as well. I've definitely found people I think are amazing and they've got an idea that's amazing. But actually the economics don't quite work. Your valuation is X and if I put Y in, you've got to be the most successful version of this in the world for this to be interesting. So I think it has to be sort of those three things have to come together. But I think if I'm brutally honest, what tends to slip over all of that is that childish entrepreneurial excitement of somebody with something new and exciting that you want to be part of. And I think that impulse I've tried to get better at pulling back on. I'm definitely that guy who, you know, can go into a meeting around strategy and get very excited and by the end want to immediately get my checkbook out. And I think I've been better at sort of Pulling back a little bit from that and going, hang on, is this right?
[00:43:34] Speaker A: If this was Game of Space Invaders, Paul, it would say game over.
So. And unfortunately we've not had time to talk about the David Beckham story as well, which would have been very embarrassing. So time for a quick break. When we come back, I'll be asking Jonathan some questions.
Welcome back to the second half of the Dealmaker Uncut podcast. We've just interviewed. You interviewed Paul Gouge, the CEO and co founder of Four Star. Amazing guy, really nice guy as well. What do you think, Jonathan?
[00:44:07] Speaker B: Well, what a fantastic story.
What an amazing story. I think one of the earlier bits of the discussion really highlighted the difference in value creation between providing a service to somebody else compared to owning your own intellectual property. And I think that really struck me that when they sold the playdemic business for a considerably larger amount of money than the other businesses because it owned all the intellectual property. So I think that's interesting.
But then the other obviously striking thing about this is the timing in which they sold that business and they sold it just before their main offering absolutely flew. And so we always say timing's everything.
I think their decision was rational, the way they thought it through.
I think it was really wise of Warner to effectively re incentivise them because that business was going so well and it will still have been dependent on the team. And I think it was great that they were re incentivized so that the alignment was still there all the way through the growth of that business.
So just. And then, you know, they seem like great guys and just a fantastic story. And again, really impressive value creation.
[00:45:40] Speaker A: Yeah, yeah. I mean, I've known Paul for a number of years and you get what you see with him. He's a really nice guy. He looked about 36, so that could be his next big business. What I quite like about Alex and, and Paul is the fact that they've been best mates and business partners now for 40 years. And actually, and I think they would say this themselves, that the success of any of those businesses wouldn't have been the same, it would just been one of them. And. And I think they've kept their feet on the ground as well.
[00:46:05] Speaker B: And.
[00:46:05] Speaker A: And I know it's not an exact science as well, but sometimes you see solo founders and they've not got that, you know, that. That sounding board next to them with a co founder. No really nice guy and really successful business as well. And obviously reinvesting through angel investment. This next section is when you have to earn Your money, which is called Ask Jonathan. It's when listeners and I can ask questions of Jonathan and he'll answer to the best of his ability. So this episode is being recorded at the start of 2025. Obviously the budget is in the rearview mirror and we're into Q1 of 2025. Are you seeing any uptick in businesses looking at exit strategies, particularly family businesses?
[00:46:48] Speaker B: Right, so there was a rush of deals completing just in the run up to the budget because people were so worried about what might happen.
There's continued to be an increased number of completions since then as a number of deals didn't get there. And I think a lot of people were expecting a much stronger M and a market during 2025. And I do still think that's happening. There's been some softening in sentiment, some of the messaging from government, some of the impact of the budget, particularly the national insurance proposals, and some of the things that have come out of that have meant that the sentiment has deteriorated. But there's still lots and lots of people who are interested in selling the business and there's still loads of certainly private equity money around.
We've just started to get the first few families coming in to see us to say they've decided to sell their businesses as a consequence of the proposed changes to inheritance tax and business property relief. And I think that is going to be a driver for more and more people as they realise that if there is inheritance tax to pay, that will need funding and at a time when the key person might have passed away, the business will suddenly become under pressure to fund bpr. So we're still confident about this year. We still think it will grow more than last year. Deals for a year or two have been a bit harder to get over the line and I think that is continuing. I think you really need to lean in to get deals done. But we're still expecting to see deal volumes going up and buyers in the market.
[00:48:43] Speaker A: Final question before we wrap up from a one of our listeners. You know, love the program, guys. What's the difference between venture capital and private equity?
[00:48:52] Speaker B: Okay, so there's a bit of jargon here, but I think in principle, generally venture capital is invested when businesses are early stage and there can be different series of investment.
But generally that's a straightforward investment in the ordinary shares of a business when the business is growing and still with a limited amount of control because it's higher risk capital, essentially where the investor's looking for a higher return, but is still joining a business where they are one often several investors. Private equity normally is there's a point at which the business is mature enough and when private equity gets on board, often the investment is in a slightly different format. Often there's more of the investment is in a loan and often the money can often be taken off the table by the founders. So often early stage investors are being bought out. Sometimes the founder's taking some money off the table, the investment is put in a more carefully protected way, and the returns are a bit lower than venture capital, but the protections of the investor are greater and the founder will often and cede a bit more control to the private equity house than they would have done to a vc.
[00:50:22] Speaker A: If I go on who Wants to Be a Millionaire and I'm asked questions about deal making terms, you're going to be the phone a friend that I call. So thank you very much for that, Jonathan. That's all for this episode of the Dealmaker Uncut podcast, powered by Alvarez and Marcel. Final shout out to what media and the star of the show, Jonathan Boyers.
[00:50:39] Speaker B: Thanks, Chris.
[00:50:40] Speaker A: Okay, don't forget to subscribe to the podcast. Tell your friends and family. Follow us on social media. Submit questions to Jonathan through the show Notes as well. That's all this episode. Thank you very much. Thank you for tuning in to the Dealmaker Uncut podcast. We hope you enjoyed today's conversation and found it insightful. If you like what you heard, be sure to subscribe and tell your friends. We'll catch you in the next episode of the Dealmaker Uncut Podcast.
