Why buy a company whose clients do not want to pay for its products? That is the question potential investors in the gaming industry have been asking themselves for years. However, 2020 saw $43 billion worth of mergers and acquisitions in the industry. It suggests many investors feel they have found an answer.
What are the advantages of an acquisition?
There are many reasons to buy another company, no matter what your industry. Here are some:
- Untapped potential: Many gaming companies found ways to monetize their product, even if the person playing the game is not the one paying. As more people get their social interaction online, opportunities to make money from this through advertising or other forms are likely to increase.
- Killing off the competition: If you cannot beat them, buy them. Purchasing your rival is one way to stop them from taking business from you.
- Economies of scale: The bigger you are, the more you can bring in-house. Or the lower you can drive prices for services you need.
- Improving your product: You might feel you have taken your company as far as you can in its present guise. Yet, with fresh input from the other company’s top employees, you may be able to re-invigorate your business.
- Combining skillsets: When you combine interests, you can create new niches to exploit.
- Access to new customers: When you buy a company, their loyal clients become yours. It gives you the chance to promote your existing products to them. It also creates a larger client base to offer new products you develop.
Business acquisitions require detailed legal and financial investigation. If you fail to spot problems before signing, you could end up losing both companies.