– Newzoo cofounder Thijs Hagoort speaking to Bloomberg about why game studios are being bought by companies that have nothing to do with games.
In recent years we’ve seen a slew of oddball acquisitions in the game industry.
Runescape dev Jagex was bought by a Chinese mining firm, Talking Tom dev Outfit7 was recently acquired by a Chinese chemical company, and Brink developer Splash Damage was snapped up by a Chinese company that dealt mainly in poultry.
All of these deals share something in common: Chinese industrial firms with no clear ties to games are buying up Western game companies. Curious devs may appreciate a recent Bloomberg feature digging into why, exactly, this is happening.
“You can buy profit,” investment banker Affan Butt told Bloomberg, suggesting that Chinese investors are much more concerned about seeing continual profits than investors in other markets.
Moreover, Butt (who was involved in the sale of Jagex to Leyou, the Chinese poultry megacorp) went on to claim that quirks in the Chinese financial markets make it worth a Chinese company’s while to buy up outside firms, even at remarkably high prices (the Outfit7 acquisition was priced around $1 billion) because those companies are often seen to be worth more once they’re incorporated into a Chinese firm.
It’s what he calls an “arbitrage opportunity”, one that may not have a huge impact on the game company being acquired if it continues to perform well.
“They weren’t looking to drain the company. They weren’t looking to take it apart,” Jagex exec Phil Mansell told Bloomberg, adding that the company’s new Chinese industrial overlords have mostly remained at a distance. “They were looking to build upon what we already had.”
The full feature, which revolves around the origins of Outfit7 and its eventual (surprisingly convoluted) sale to a Chinese industrial outfit, is well worth reading over on Bloomberg’s website.