Reports tell us that the dominant Chinese gaming company, Tencent, is actively purchasing sizeable stakes from a number of international gaming firms. The tech giant is reportedly focused more on buying majority stakes in foreign gaming companies as it seeks global expansion to counteract slowing growth at home in China.
As per Reuters, Tencent had previously been content to hold minorities of shares and be a "passive financial investor," but it is now "aggressively seeking to own majority or even controlling stakes in overseas targets," primarily in the "core gaming sector." Tencent is also said to be interested in metaverse assets.
More About Tencent's M&A Strategy Shift
Tencent currently owns shares in a large number of businesses and game studios around the world. These include Pocket Gems, Epic Games, Roblox, Riot Games, and Roblox. WeChat and Tencent Music are also included in this list.
According to Bloomberg, Tencent's decline, which came close to making it Asia's second trillion-dollar company in early 2021, reflects the numerous risks the gaming industry faces. Moreover, the biggest obstacles to recovery continue to be Beijing's overhaul of gaming companies and the country's slowing economic growth.
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Besides that, the business has also been firing staff members since August as it experienced its first-ever decline in revenue. As a result, the company had to lay off 5% of its workforce, which had an impact on close to 5,000 people. It appears that the company has already found a solution to its sales decline given the news of a recent streak of share buyouts.
A Closer Look
To further explain Tencent's abrupt strategy shift, the Chinese megacorp is now banking on global markets for future growth, which it will achieve through a strong portfolio of chart-topping games. Most Chinese tech and gaming powerhouses make this move in order to keep up with the country's stringent market regulations.
The largest video game company in the world by revenue has already made investments in more than 800 businesses, according to VGC, which supports this claim. Along with holding shares in Activision Blizzard, Ubisoft, PUBG Studios' parent company Krafton, PlatinumGames, FromSoftware, and Marvelous Inc., this also includes a 40% stake in Epic Games.
Additionally, based on the most recent Eurogamer report on the matter, Tencent has invested €300 million in Guillemot Bros. as part of a significant investment in Ubisoft. As of right now, Tencent owns a 49.9% stake in Guillemot Bros., the company with the largest stake in Ubisoft.
It is also important to note that the Chinese tech giant, which also owns stakes in a number of other well-known gaming and entertainment companies, has made dozens of other investments in addition to this one.
"In terms of the game business, our strategy is ... to focus on developing our capabilities, especially in the international market," Tencent told Reuters. "We will continue to be very active in terms of acquiring new game studios outside China."
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