Background and challenge

With the PC gaming industry growing worldwide, the race is on for growth-minded firms to take advantage of opportunities in rapidly maturing markets in the Asia-Pacific region and in Europe, the Middle East and Africa. One of the most enticing markets is China, with a rapidly growing middle class and a tech-minded culture.

A private equity firm was considering how to maximize the value of a portfolio company that was a leading supplier of components to high-performance gaming PCs. The private equity firm enlisted L.E.K. Consulting to evaluate the forecasted growth of the international PC components market and to assess the company’s competitive positioning within the market.

A key challenge was understanding how the gaming market segments across hardcore gamers, core gamers and moderate gamers. The client needed to know how the segments varied in spend.

Approach and recommendations

We took a murky environment and prioritized three key dimensions: PC gaming population, penetration rate of products into the gaming population and spending by gamers.

In order to assess each of the three dimensions, we had in-depth discussions with key market experts and identified two new growth drivers: eSports and virtual reality. We then launched a survey of more than 1,500 gamers worldwide to understand current and potential consumer habits and the impact of growth drivers.

Our assessment culminated in a forecast for global demand of PC components segmented by region and product. We determined the key purchasing criteria of gamers and how the company performed across each criterion by product. We were able to successfully identify where the company had competitive advantages and where there was room to grow.

Finally, we were able to identify the size and fit of adjacent PC product opportunities for the company to capture.

Results

Our assessment provided assurance around the long-term growth prospects for the company and documented the value. Using our work, the client successfully sold its stake for a significant multiple of its initial investment.