Electronic sports and entertainment company FaZe Holdings Inc. is being acquired by media and technology conglomerate GameSquare Holdings Inc. Hollywood-based FaZe has been working to get back on its feet this year while addressing a delisting notice from the Nasdaq. It recently terminated its chief executive of five years, Lee Trink, and in May laid off 40% of its staff. 

The all-stock transaction was unanimously approved by both companies’ boards and FaZe said it is expected to close in the next 60 to 90 days. GameSquare’s chief executive, Justin Kenna, said the deal will allow his company to further monetize its infrastructure and views the acquisition as a “real opportunity.” The deal’s value will be determined by FaZe’s stock price at the time of the deal’s closing. 

FaZe began as a video channel of gamers who posted clips and highlight reels of “Call of Duty” games. It formally launched in 2010 as a “lifestyle and media platform rooted in gaming and youth culture,” and manages content creators and owns more than 10 competitive esports teams.

Executing vision

“It’s not every day that you’re able to acquire a brand like this, and there’s certainly no other brand like this in the gaming space,” Kenna said. “(FaZe’s team) have a lot of ideas … about how the brand can engage with audiences through content and talent. I think they’re reenergized and excited, and I think we have the right infrastructure and (team) to put around them to really execute that vision.”

GameSquare, which is based in Frisco, Texas, enables brands to “connect with gaming and youth culture audiences.” Its current subsidiaries include esports talent agency Code Red Esports Ltd., Mar Vista-based esports media company Gaming Community Network and Del Rey-based marketing agencies Cut + Sew and Zoned. One of its largest divisions is Complexity Gaming, an esports organization that was founded in 2003.

FaZe went public on the Nasdaq in July of 2022 – with a valuation of $725 million – and in March received a notice stating it needed to raise its share price to prevent delisting. As a result of the two public entities combining – GameSquare began trading on the Nasdaq in April –  FaZe’s ticker will no longer exist and the delisting issue will be a “moot point,” according to a company spokesperson. On Oct. 20, when the acquisition was announced, FaZe was trading at 20 cents per share.

Cost reductions

Kenna said that GameSquare plans to execute about $18 million cost reductions to get FaZe’s business “healthy.” In acquiring FaZe, Kenna said that GameSquare is “extremely optimistic” about its value and about the esports industry, in which it will continue investing.

“We feel really bullish about what we can do with FaZe … there’s a lot of optimism on our side, we’re very much looking forward, not backwards,” Kenna said. “It’s very much a growth play for us and we’re looking forward to getting runs on the board and driving some value for shareholders in this space that, quite frankly, hasn’t seen it to this point.”

Kenna worked at FaZe prior to its initial public offering, serving as chief financial officer and chief investment officer. He said that his departure to GameSquare was sparked by a desire to lead a company, rather than manage the “commercial and strategic” functions of being CFO of a public company. Kenna said that the decision to take FaZe public was being discussed while he was its chief financial officer.

“FaZe (wasn’t) going public at the time, but clearly it had been discussed and looked like the course of where things were headed,” Kenna said. “I’d also been there for nearly three years and felt that it was time for my next challenge. The business was in pretty good health, really, when I left … certainly wasn’t a huge negative on FaZe, it was just time for me to take on the next challenge, and I wanted to run a company.”

FaZe most recently made news when it terminated Trink, who held the title of chief executive when the company went public last year. A FaZe spokesperson told the Business Journal in August that it did not expect to be delisted and had “taken steps to remedy the current deficiency as needed.”

FaZe founders Thomas Oliveira, Yousef Abdelfattah and Richard Bengston will take on leadership roles at FaZe, which will operate as a wholly owned subsidiary and division of GameSquare. Until now, FaZe’s chief financial and operating officer, Christoph Pachler, had been serving as its interim chief executive. Bengston will replace Pachler as the chief executive of FaZe, with Oliveira and Abdelfattah as president and chief operating officer, respectively. Pachler’s role at the company after the deal has not been determined.

FaZe’s esports teams, employees and partnerships will continue to operate under the FaZe name. Kenna said that FaZe will remain headquartered in Los Angeles.

“We’re not looking to consolidate the two brands; we think the brands are very different and they both have their own space in in the gaming orbit,” Kenna said. “We think we’ve done a really good job at monetizing Complexity with the infrastructure that we’ve built around it, and I think that’s a really good blueprint for what we’re going to be able to do with FaZe, which clearly has a much larger audience than Complexity does.”