After the acquisition of Activision Blizzard, there were predictions that Microsoft’s next step could be the purchase of a conditional Capcom or SEGA. However, analyst Serkan Toto dispelled these myths and explained why the chances of absorbing a Japanese company tend to zero.Yakuza: Like a Dragon
The head of the consulting firm Kantan Games shared his thoughts in the newsletter of Nathan Brown, a video game consultant and former editor of Edge magazine.
According to Toto, anything can be expected in the market today. However, the purchase of any Japanese publisher by Microsoft is so unlikely that it will cause even more excitement than the deal with Activision Blizzard.
“So far, no foreign game company has been able to acquire a Japanese studio. And I guarantee that such attempts were made by both Western and Asian players,” Toto stressed.
It is worth noting that the purchase of Japanese companies by foreigners is, in principle, a rare phenomenon. In 2019, the UN Conference on Trade and Development ranked 196 countries in terms of foreign direct investment. Japan took the last place in this list, losing even to North Korea.
The reason lies in the so—called keiretsu – large conglomerates of various companies and industries united by commercial interests. In recent decades, they have lost full control over the Japanese economy, but still partially retain their influence. Some companies also own shares in other participants of similar formations.
As Brown notes, one of these keiretsu includes, for example, Sony along with Mitsubishi, Hitachi and other companies from different sectors of the economy. The members of the conglomerate support each other, conclude deals with each other, provide benefits and are extremely jealous of external interference.
For this reason, Microsoft and any other Western company have little chance of making a major purchase in Japan. Not to mention more aggressive forms of acquisitions that simply won’t work in this market.
“For a foreign company, an attempt to take control of a public studio against its will is a real suicide. I would bet my house that this will never happen,” Toto said.
In addition, potential takeover targets like Capcom or Square Enix are successful in themselves. They are profitable, have a sufficient amount of money and simply do not need to be absorbed. Even if they want to expand, the most preferable option would be to merge with another Japanese company.
Toto believes that the boom in M&A deals in the gaming industry will soon reach Japan. However, in this case, local gaming companies and keiretsu participants would rather do business with each other than consider offers from foreign publishers.
“If the Japanese gaming industry begins to consolidate, most likely, PlayStation, not Xbox, will benefit from this,” Brown stressed.
Sony has an advantage in this market because it will be able to avoid all the problems that Microsoft would have to face. “It doesn’t necessarily have to be one of the big public companies, but I think Sony is at least considering making a potential deal in Japan,” Toto concluded.