Tencent To Buy British Game Developer In $1.3 Billion Deal Amid Pandemic-Fueled Boom

Tencent will buy British video game developer Sumo in a $1.27 billion deal as people lodged at home during the pandemic crowd online to try for new high scores.

Sumo and Sixjoy Hong Kong, a subsidiary of Tencent, announced the deal earlier this week. Mount Emei Investment, another subsidiary of Chinese billionaire Ma Huateng’s Tencent, already owns about 8.75% of Sumo.

Lockdowns and social distancing accelerated a global market jump in gaming. According to market research firm Strategy Analytics, the global gaming market is expected to grow to $250 billion by 2025 from $150 billion last year.

“Sumo gives Tencent a world-class games developer with global scale outside China at a low price,” says Neil Mawston, executive director at Strategy Analytics. “Sumo is seen in the U.K. as one of Europe’s best game developers, working with Sony, Sega and others.”

Sheffield-based Sumo expects to benefit from Tencent’s “broad video gaming ecosystem, proven industry expertise and its strategic resources, which will help secure and further the aspirations and long-term success of Sumo,” Ian Livingstone, non-executive chairman of Sumo, said in the announcement.

Benefits would work both ways. “The acquisition of Sumo will add significant further gaming content for Tencent, both for the large Chinese domestic gaming market as well as for its global business,” says Rajiv Biswas, Asia-Pacific chief economist with research firm IHS Markit. Sumo’s games include Hotshot Racing and WST Snooker.

Tencent-Sumo isn’t the only deal that’s chasing online game popularity, notes Chris Marshall, associate vice president for IDC Asia Pacific. Marshall cites “a number of large M&A deals” over the past two years based on Covid-19-era growth in gaming.

Popularity of online gaming is expected to taper after the pandemic, but not fall far as younger people like the pastime and 5G mobile technology makes play easier. Most new gamers are expected to keep playing, and 75% of the recent net increase in gaming will hold up along with them, IDC found in a survey.

“While reopening of societies worldwide after the pandemic is expected to result in some dip in online gaming, most of the increase in size of the market is expected to persist, with continued rapid growth over the medium-term,” Biswas says. “Important drivers for growth in the global online gaming market will be global 5G rollout as well as the continued shift in entertainment preferences towards gaming among Generation Z youth.”