Valuation Analysis of Mergers and Acquisitions in the Gaming Industry: A Case Study of Tencent’s Acquisition of Supercell

Chenyu Zhou ()
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Chenyu Zhou: China University of Political Science and Law, The School of International Law

A chapter in Proceedings of the 2025 International Conference on Hybrid Commerce, Human Capital, and Economic Dynamics (ICHCH 2025), 2026, pp 119-130 from Springer

Abstract: Abstract This study examines the complex problem of intangible asset valuation in the gaming industry, focusing on Tencent’s acquisition of Supercell in 2016, through a combination of theoretical valuation methodologies in cross-border mergers and acquisitions. This study reveals the limitations of the cost approach and income approach in the valuation of the gaming industry. The cost approach causes substantial valuation impairment due to its inability to quantify the asset-light enterprises, and the income approach is subject to the constraints of the high iterative nature of the gaming industry and product life cycle uncertainty, which results in significant prediction deviations. This study validates the market approach by calculating Supercell’s market value based on the average price-to-earnings ratio of small and medium-sized game companies in Europe, then extrapolates the market discount due to cross-border mergers and acquisitions risks. The results of the study reveal that the Price-to-Earnings ratio model in the market approach accurately matches the transaction value after adjusting for risk discount factors. This research concludes that asset-light valuation in the gaming industry should utilize industry-calibrated Price-to-Earnings ratio and dynamically incorporate non-financial risk discount factors.

Keywords: M&A Valuation; Gaming Industry; P/E Ratio Model (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-2-38476-585-0_15

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