Tencent Seeks Majority Stakes in Overseas Gaming Firms

Chinese tech giant Tencent Holdings Ltd. is reportedly changing its strategy on mergers and acquisitions (M&A) by taking an aggressive approach towards investing in overseas gaming companies, as it relies on global expansion to cope with sluggish growth at home.

Four sources familiar with the matter stated that the company is now aggressively aiming to have a majority or even controlling stakes in overseas gaming firms, particularly the ones in Europe.

Shenzhen-based Tencent was a passive investor that traditionally only held minority stakes in businesses.

In addition to gaming assets, the firm has expressed interest in acquiring metaverse-related assets, mainly in Europe as well, according to two of the sources.

The Pursuit of Global Expansion

The sources said the change came as the world’s biggest gaming company by revenue sourced its future expansion from global markets. A move that would require Tencent to have a solid set of best-selling titles.

Tencent’s reset of its M&A strategy also hinted at major Chinese companies’ move to recover from the regulatory impact after two years of crackdown and uncertainty that weakened their sales in their home country and led to a significant selloff in their stocks.

The company said it has been making overseas investments for a long time, even before China implemented new regulations, finding innovative businesses with skilled management teams and providing them the opportunity to grow independently.

Furthermore, Tencent’s new focus on larger stakes in gaming firms came as other major tech groups such as Microsoft Corp., Sony Group Corp., and Amazon.com Inc. placed strategic bets on the gaming sector and related intellectual properties, the sources stated.

In September, Tencent increased its stake in French game maker Ubisoft Entertainment SA to 49.9% for €300 million ($296.9 million) via the Guillemot Brothers Ltd., allowing it to bring some of Ubisoft’s popular videogames to mobile.

The investment was one of the many investments of the Chinese tech giant, which also have a majority stake in the US’s Riot Games Inc., the UK’s Sumo Digital Ltd., and Canada’s Digital Extremes.