Ubisoft go shopping

There are two great strategic effects coming together here with some serendipdy.

The first is that Ubisoft are very well managed as a company. They have a fantastic global studio structure and were the first into China and one of the first into Canada for development. They make quality games and have moved strongly to original IP, which is the way to go. This makes them very profitable. And this profitability gives them competitive advantage. They can borrow money more easily and cheaply. And their stock has a higher price if they want to buy something using equity or if they want to merge.

The second is that the video game publishing industry has enormous competetive advantages of scale, especially for globally sold boxed product. This is why it is inevitable that our industry consolidates into a small number of big players. Why Activision and Vivendi have merged and why Electronics Arts want to buy Take Two. And with big media companies like Warners and News Corporation moving into gaming there is a time imperative. Companies that don’t consolidate to become massive will themselves fall victim to the consolidator.

So with these two strategic forces it is hardly surprising that Ubisoft are looking at Merger and Acquisition (M&A) activity. In fact it would be very remiss if they weren’t. But typical of Ubisoft they are going about it with great care: “Our idea is to increase the speed of our growth organically, whilst looking at other opportunities for external growth within a certain limit. It’s sensible. We feel that mergers and integration is something that can be very damaging to a global company.”

So who might be potential suitors? Infogramme, obviously, would be cheap and it has the advantage of being French, like Ubisoft. It also has a whole pile of heritage original IP from its various acquisitions and from Atari. Sci/EIDOS would be a good buy for the same reasons of cheapness and IP catalogue. In fact either of these has the potential to unlock the great heritage of original British game IP that is currently locked away, ignored and unused. Another tempting target for its original IP would be Codemasters, whose games, if produced in low cost Ubisoft studios and marketed by the global Ubisoft publishing organisation, would be vastly more profitable. Likewise Sega must be very tempting as its stock value is held down by under-performance and in no way reflects its storehouse of brands. And there are Take Two and THQ that would both probably be better off owned and managed by Ubisoft.  Of course Ubisoft could buy multiple targets, the problem then is digesting them and getting the best value for their investment.

Another fantastic advantage of M&A activity using equity is that it would dilute Electronic Art’s stake in the company.

1 Comment

  1. Quality games?. Sorry, Bruce, but Ubi is the worst publisher out there. They release buggy products, and then they don’t have decent support for many of them (or none at all!). Ubi Romania is their only decent studio, and their games come always with some over-the-top DRM that ends hurting the buyers (anyone remember the Silent Hunter 3 fiasco with Starforce?)

    And now, they are admitting that in many games (namely Assassin’s Creed) they introduced deliberated bugs that didn’t let you finish the game to thwart the pirates. In the final production chain!.

    And let’s not forget Rayman Raving Rabbids, which would not even start because of SecuROM woes. For months, the answer from Ubi Tech Support was “update your monitor drivers”, and if that didn’t work you were toasted.

    And then they wonder why nobody is buying their games… Sorry, but they deserve to go bankrupt.

Comments are closed.