December 9, 2010 6:55 PM

Farmville with Friends: Zynga Acquires Newtoy in Social-Mobile Gaming Deal

Posted by Drew Combs

Zynga Inc., maker of the popular Facebook-based game FarmVille, has acquired Newtoy, Inc., best known for the social gaming franchise Games With Friends, in a deal announced late last week.

The deal gives Zynga, which describes itself as the largest social game developer, a greater presence in the mobile gaming market with Newtoy titles such as Words With Friends (a crossword game that has been downloaded 12 million times) and Chess With Friends.

In a written statement announcing the deal, Mark Pincus, founder and chief executive of Zynga said, "The Games With Friends franchise is the best social game experience available on mobile today and we are excited to welcome the Newtoy and Zynga family." He added that the Newtoy team "...will continue to invent great mobile social game experiences for Zynga users everywhere."

This is just the latest is what has been a series of acquisitions for Zynga. In June the San Francisco-based company acquired Challenge Games, whose popular titles included "Warstorm"; in October it bought Bonfire Studios, a Dallas-based social game company.

The terms of this most recent acquisition were not disclosed, but Ropes & Gray partner Brian Erb, who represented Zynga, describes it as the company's biggest deal to date. The firm previously represented Zynga in its acquisition of Cambridge, Mass.-based social game company Conduit Labs, which was announced in August.

Newtoy was represented on the deal by Fenwick & West Silicon Valley-based partner R. Gregory Roussel and Lawrence Mandala in the Dallas office of Munck Carter.

Zynga's games, which in addition to FarmVille include FrontierVille and Mafia Wars, attract 215 million monthly users on an expanding number of platforms, including Facebook and Yahoo!, as well as on Apple's iPad and iPhone.

In October, it was reported that SharesPost, an exchange for shares of privately held companies, gave the company a valuation in excess of $5 billion.

"Zynga is a growing company, and their legal needs have also grown," Erb says. "They have very quickly beefed up their internal legal department and have expanded the firms they rely on. We're happy to be in that group." (Zynga's general counsel is Reginald Davis, a nine-year Yahoo, Inc., veteran, whose addition to the company was announced in June 2009. He oversees a legal department of ten attorneys.)

Zynga's list of approved legal services providers doesn't consist of dealmakers alone. In under four years of operation, the company has been involved in its share of high-profile litigation. It currently is embroiled in a trade secrets case in California state court against rival social game company Playdom, which was acquired by the Walt Disney Company in July for $563.2 million.

In the lawsuit filed in September 2009, Zynga accuses current and former Playdom employees of stealing key documents when they left Zynga for jobs at Playdom. Zynga is being represented in the lawsuit by a team from Paul, Hastings, Janofsky & Walker.

In October the company was hit with a class action lawsuit over alleged security breaches. The lawsuit claims that whenever someone clicks on an advertisement displayed on a Zynga game, the user's unique Facebook ID is transmitted to third parties such as advertisers and Internet marketing companies. Zynga is represented in that case as well as the ten other related cases by Duane Morris partner Richard Seabolt.

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