Tencent is said to be changing its M&A strategy for the next few years. No more buying small shares of video game companies, the Chinese giant wants to have majority shares with its investments.
Tencent is in the process of reviewing its merger-acquisition strategy according to those close to the management interviewed by Reuters. Tencent would like focus more on buying majority stakes, mainly in overseas game companies“.
No more small slices, Tencent wants as many cakes as possible
One of the explanations given by these anonymous informants is the economic context in China; currently its growth is slowing down. Expanding overseas would be a way for Tencent to keep growing. For several years, Tencent has focused on new ventures in the video game industry, mostly based in China. Acquisitions of often minority shares which gave Tencent the status of a passive financial investor.
From now on, Tencent would like to hold majority stakes, to take control of companies outside of China, particularly in Europe. There is the will to maintain a certain level of growth and which will require the creation of successful games. In fact, for several years, the company has wholly or partially owned very large publishers and studios, such as Riot Games (100%), Supercell (84%) and Epic Games (40%).
Especially since in nearly two years, Tencent’s stock price on the Hong Kong stock exchange has fallen from around HK$750 to around 260 dollars today, a drop of more than 65%. A fall due to repressions and economic and political uncertainties in the country. In reaction to this, it can be seen that the pace of Tencent’s transactions in China has slowed down, ” since the intensification of regulatory crackdowns and the divestment of a handful of national portfolio companies “, notes the news agency.
The latter notes that this year, the Chinese giant has carried out 27 operations for a value of 3 billion dollars abroad. Much lower investment in China. Last year, the company repeatedly insisted that it wanted to increase the share of its revenue from outside China by up to 50% and therefore reduce the share of its revenue from China. . Currently, 25% of its income comes from abroad.
Tencent wants to invest in the metaverse
According to the sources ofReuters“Tencent is also looking to acquire global assets, particularly in Europe, tied to the so-called metaverse.“. In addition to this, we know that the company is working on games running under Unreal Engine 5 and on cloud gaming.
On the side of official statements, the company clarified that it had already been investing abroad for a long time, “long before any new regulations” in China. She adds that she leaves the possibility to the companies in which she invests “to develop independently“. Last August, James Mitchell, chief strategy officer at Tencent, said that Tencent would remain active in acquiring new video game studios outside of China.
Investing in larger stakes would be the way for Tencent to have a greater right of scrutiny over the companies in which it engages financially. It is also the way to acquire intellectual property rights on popular series and licenses.Reutersclarifies that the Chinese government is limiting the approval of video games in the country and has suspended “the approval of foreign intellectual property games“. With this in mind, Tencent increased its stake in Ubisoft from 4.5% to 9.99% a few weeks earlier.
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