Chinese gaming giant Tencent is reportedly changing its acquisition strategy and “aggressively seeking” majority or controlling stakes in foreign gaming companies.
That’s according to a new report from Reuters, which says the conglomerate is putting more emphasis on buying businesses outright, after years of investing in minority stakes, as it tries to make up for the slowing growth in China.
Tencent, which is the world’s largest video game company by revenue, has already invested in more than 800 companies. This includes a 40% stake in Epic Games and owns shares in Activision Blizzard, Ubisoft, PUBG Studios parent company Krafton, PlatinumGames, FromSoftware, and Marvelous Inc.
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However, Tencent has made fewer full acquisitions. Currently, it owns 100% of developers such as Funcom, Riot Games, Sumo, Turtle Rock, Digital Extremes, and Splash Damage.
According to Reuters sources, the tech giant is now aggressively seeking majority or controlling stakes in foreign targets, “particularly in Europe.”
The change in strategy is believed to be due to the company’s new reliance on global markets for future growth, as China tightens its domestic regulations.
Tencent told Reuters the company had been investing overseas for a long time, “long before any new regulations” in China. It seeks “innovative companies with talented management teams” and gives them the opportunity to grow independently, the company said.
Tencent confirmed in an earnings call in August that it would remain active in acquiring game studios overseas.
“In terms of gaming business, our strategy is…to focus on developing our capabilities, especially in the international market,” he said. “We will continue to be very active in terms of acquiring new game studios outside of China.”
M&A activity in the games industry hit a record $85 billion in 2021 and is expected to hit $150 billion this year, with huge deals such as Microsoft’s acquisition of Activision Blizzard and the acquisition of Zynga by Take-Two having already been announced.
Earlier this week, Saudi Arabia’s public investment fund said it would invest an additional $37.8 billion in games industry acquisitions, including around $13 billion to acquire “a top game publisher plan”.
