Tencent changes its focus on majority agreements and international gaming assets as growth engines

• Tencent is realigning its M&A strategy, primarily focused on buying control stakes in foreign game companies. The tech giant is seeking global expansion to offset slowing growth in China, people familiar with the matter said.

Tencent Holding Ltd has invested in hundreds of startups over the years, primarily in the onshore market. We typically take minority stakes and continue to invest as a passive financial investor.

However, it is now actively seeking to own majority or majority stakes in foreign targets, particularly European gambling establishments.

This shift comes as the world’s leading game companies by revenue rely on the global market for future growth, and that requires a strong portfolio of chart-topping games. Tencent’s new strategy looks at how the Chinese tech giant seeks to emerge from the shadow of regulation after two years of crackdowns and uncertainty weighed on home sales and sparked a massive stock sale.

Tencent told Reuters that it had been investing abroad “long before new regulations were introduced” in China. The company is looking for “innovative companies with talented management teams” to give them room to grow independently, the company added, without elaborating.

Apart from its core gaming division, Tencent is also looking to acquire global assets related to its so-called metaverse, particularly in Europe, according to one of the sources and another with direct knowledge of the matter.

Tencent’s move to increase its stake in the gaming company comes in parallel with other tech giants such as Microsoft, Sony and Amazon acquiring gaming assets and related intellectual property. He said three sources. Tencent’s chief strategy officer, James Mitchell, said on a post-earnings conference call in August that the company remains aggressive in acquiring new game studios overseas.

“When it comes to the games business, our strategy is… to focus on developing our capabilities, especially in the international market,” he said. “We will continue to actively acquire new game studios outside of China.”