[THE INVESTOR] Korea’s game companies should engage in more active mergers and acquisitions to overcome a slowdown in the pace of growth and maintain competitiveness, according to a Samjong KPMG report on Oct. 5.

The size of the country’s game industry, estimated to be around 12.1 trillion won (US$10.70 billion) this year, is expected to continue to grow but the pace of growth is slowing down. While the global game industry has been growing at an average of 6.9 percent in the past four years, the domestic game industry has been growing at a pace of 3.9 percent. This is projected to get slower to 3.4 percent next year.

“Game companies should take advantage of the opportunities from the convergence of industries and technologies,” said Park Sung-bae, managing director Samjeong KPMG’s game industry department. “They should establish a new business strategy that fits this opportunity by expanding their games with new platforms or intellectual properties acquired through M&As.” 

According to the report, there were 67 M&As on average each year in the global game industry from 2013 to 2017 with a trend of big companies buying out small game developers. The large developers want to take promising companies under their umbrella to reinforce their competitiveness while securing new IPs.

The report also showed of the 10 largest deals between 2013 and 2017, three were led by Chinese companies. Korean mobile game giant Netmarble Games’ US$841 million acquisition of US-based Kabam Games was the eighth-largest deal.

This year, game companies have been showing interest in companies with technologies that could maximize user experience for their existing games as well as cloud-based game developers. For instance, PUBG, the developer of hugely popular “PlayerUnknown’s Battlegrounds” bought New York-based online tool maker MadGlory in March. Also, MadGlory’s third-party tool technology is likely to enable community developer tools for the game, the report noted.

By Park Ga-young (gypark@heraldcorp.com)