Tencent to change its acquisition strategy, shifts focus to majority stake deals

The Chinese tech giant is counting on global gaming markets for its future growth.
A photo of Tencent's HQ from the surface level

The biggest video gaming company per revenue and size, Tencent, is shifting its focus to buying the majority and controlling stakes of overseas gaming companies, per Reuters‘ latest report. Tencent’s been following an aggressive acquisition strategy across Europe in the last few years (in North America as well); however, the company was more interested in buying minority stakes and had no intention of acquiring controlling stakes or having a name on the board of these gaming entities.

Related: How to launch a video game in China?

The shift in focus and acquisition strategy —despite being rumors at this point— doesn’t come as a surprise as quite a number of industry experts were expecting this kind of a move from the Chinese mega-company.

Reuters cites “four people with direct knowledge of the matter” as its source of news, and considering how the publication’s recent exclusive reports on Tencent were spot on, Mobidictum considers this piece reliable as well.

Why Tencent wants to invest outside of China?

Due to multiple setbacks and obstacles Tencent faces at home, the Chinese company wants to focus its growth outside of home grounds and aims to have half of its video games revenue outside of China. The Chinese government limits Tencent’s capabilities at home, which resulted in the company shutting down multiple divisions and projects this year alone.

Tencent’s gaming revenue saw a %1 decline, both in China and across global gaming markets this last quarter, and its shares in Hong Kong decreased by about 60% in the last two years. Furthermore, the Chinese regulatory body issued only one video game license to Tencent (via a subsidiary) since the freezing of licenses was imposed in China back in July 2021.

Reuters’ resources also said Tencent doesn’t expect the regulatory crackdowns to ease any time soon and wants to have a strong portfolio of games that dominate the market. Per the report, Tencent is also interested in acquiring global assets, mainly in Europe, that have a strong presence in metaverse and related products and assets.

Meanwhile, Tencent says the company was already set on its M&A strategy and started the work on it way before crackdowns and license freezes were imposed.

Most recently, Tencent invested $300 million in Ubisoft parent company Guillemot Bros increasing its ownership over the company to 49.9%, and bought minority stakes in Digital Confectioners and Mordhau developer Triternion.

NEXT: Tencent and Sony acquire over 30% of Elden Ring developer FromSoftware

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