[Click eStock] "Krafton Secures Forward Base for Entry into Japan with ADK Acquisition"

On June 25, Hana Securities assessed that Krafton's acquisition of ADK, one of Japan's top three comprehensive advertising agencies, has secured a forward base for entry into the Japanese market.

Previously, on June 24, Krafton announced that it would acquire BCJ-31 from Bain Capital Japan for 710.4 billion KRW (75 billion yen). BCJ-31 owns ADK Holdings (260 employees) as a subsidiary, and ADK Holdings oversees ADK Marketing Solutions (1,570 employees), ADK Creative One (340 employees), and ADK Emotions (130 employees), among others. ADK's main businesses are advertising and animation content licensing, with advertising accounting for more than 80% of its revenue.

Krafton has achieved strong results in the Chinese market through its partnership with Tencent, and in the Indian market through its own efforts. Lee Junho, an analyst at Hana Securities, stated, "Japan is the third-largest gaming market in the world and cannot be overlooked. In the animation sector, Japan leads globally," adding, "This acquisition is expected to mark the beginning of Krafton's full-scale entry into the Japanese gaming and content market, and there is a possibility of further mergers and acquisitions (M&A) involving Japanese game companies." There is also an outlook that, after additional acquisitions of game developers, Krafton could commercialize intellectual property (IP) such as animation held by ADK subsidiaries.

Based on BCJ-31's performance, which reflects ADK's results, last year's revenue was 1.1616 trillion KRW, and net profit was 12.9 billion KRW. When consolidated into Krafton's financial statements, the company's future annual operating margin could decrease to around 30%, down from the current low-to-mid 40% range.

Over the past four years, Krafton has carried out more than 30 M&A deals, with most targets being game studios such as Unknown Worlds. However, in India, Krafton has invested not only in fintech companies but also in digital entertainment, thereby building an ecosystem spanning the entire content sector.

Lee added, "With this ADK acquisition, Krafton's intention to expand its global content business through non-gaming acquisitions outside of India has become clear," and predicted, "Even after the ADK acquisition, the company will retain more than 3.5 trillion KRW in cash, so it is expected to continue expanding its global business through further M&A."