Invested in more than 20 companies in two years, the market value has increased eightfold to deconstruct the game "M & A" of Sanqi Mutual Entertainment

A series of acquisition operations and the revenue they bring have caused the market value of Sanqi Mutual Entertainment to continue to rise, from 4.2 billion yuan at the beginning of its listing to the current 37 billion yuan. However, under competitive pressure, the performance fluctuations of the M & A companies invested by Sanqi Mutual Entertainment will still make Sanqi Mutual Entertainment's pan-entertainment layout risky.

At the beginning of its establishment, Sanqi Mutual Entertainment mainly provided the operation and promotion of domestic web games, and its market share in web games is second only to Tencent. As the growth rate of the game market has slowed down, the Sanqi Mutual Entertainment Plan has begun to frequently operate capital and increase its pan-entertainment layout, investing in film, television, animation and other fields. Since its listing in 2014, Sanqi Mutual Entertainment has invested and acquired more than 20 game, film and television, and technology companies. A series of acquisition operations and the revenue they bring have caused the market value of Sanqi Mutual Entertainment to continue to rise, from 4.2 billion yuan at the beginning of its listing to the current 37 billion yuan. However, under competitive pressure, the performance fluctuations of the M & A companies invested by Sanqi Mutual Entertainment will still make Sanqi Mutual Entertainment's pan-entertainment layout risky.

Established six years ago, with a market value of nearly 40 billion yuan, Sanqi Mutual Entertainment was established in 2011. At the beginning of its establishment, it mainly provided the operation and promotion of domestic web games.

With the rapid development of the game market, Sanqi Mutual Entertainment has been working on game research and development since 2012, and has used this to invest and acquire a number of game companies. After the launch of homemade games, Sanqi Mutual Entertainment has also entered a period of rapid growth. In 2013, the number of Sanqi Mutual Entertainment's exclusive games and proprietary games opened accounted for 30% of the total number of services opened, and in 2014 it rose to 47%. Sanqi Mutual Entertainment, which had revenue of only 587 million yuan in 2012, had revenue of more than 1.7 billion yuan in 2013, and its performance was second only to Tencent in the field of web games.

With the continuous development of games, Sanqi Mutual Entertainment began to increase its overseas investment landscape and successively entered China Taiwan, South Korea, Southeast Asia and other regions. By the end of 2014, 70 games had been pushed overseas by Sanqi Mutual Entertainment, with more than 33 million registered players. With the rise of the VR industry in 2016, Sanqi Mutual Entertainment also began to deploy the VR field and invested in Archiact, a Canadian VR content developer. In December 2014, Sanqi Mutual Entertainment successfully entered the China A-share market and completed its overall listing in May 2015. As of now, Sanqi Mutual Entertainment owns professional game operation platforms such as 37 Games, 37 Mobile Games, and 37 Games, with a cumulative number of registered users exceeding 550 million. The market value has also risen from 4.2 billion yuan at the beginning of the listing to the current 37 billion yuan.

Faced with a huge user base, Sanqi Mutual Entertainment has begun to frequently operate capital and add to its pan-entertainment layout in the past two years. Public data shows that since its listing in 2014, Sanqi Mutual Entertainment has invested and acquired more than 20 small and medium-sized enterprises, including games, film and television, animation and other companies. It has also cooperated with Xinghao Pictures, Mango Media, Aofei Entertainment, etc. Film and television companies reached a strategic agreement. In the field of film and television IP, Sanqi Mutual Entertainment has produced a series of IP games such as "Nirvana in Fire","Journey to the West: Monkey King Three Beats the White Bone","War God Zhao Zilong", and "Tian Jiang Xiongshi". It is understood that the future will not rule out the possibility of making popular games into movies.

Financing and reinvestment through mergers and acquisitions has shifted from the original operating platform to independent research and development. Sanqi Mutual Entertainment has undoubtedly embarked on a successful path.

In October 2013, Sanqi Mutual Entertainment founded a subsidiary company Aurora Network, specializing in web game research and development. In just half a year, this subsidiary company developed the web game product "Sword of the Archangel". In just two months after the game was officially launched, the sales volume reached 320 million yuan, setting a record for the game industry. Another game,"Legendary Overlord", exceeded 300 million yuan in 80 days during the public beta period. The success of homemade games not only maximized the value of the operating capabilities of the Sanqi Mutual Entertainment Platform, but also laid the economic foundation for subsequent investment and mergers.

"The capital operation of the enterprise is undoubtedly based on the long-term development of the enterprise. The capital operation in the early stage of Sanqi Mutual Entertainment also provided financial support for subsequent operations. Maximizing the use of its own funds is not only conducive to the improvement of the company's own business, but also conducive to the stable development of the industry." Zhang Jingcheng, director of the China Creative Industry Research Center, said this. Through the accumulation of capital in the early stage, Sanqi Mutual Entertainment began to expand its game landscape. On the one hand, it conducted mergers and acquisitions through existing capital to enhance the company's layout in terms of content, distribution, etc.; on the other hand, it obtained greater profits by investing in companies, forming a virtuous cycle.

Under a series of capital operations, Sanqi Mutual Entertainment's performance grew rapidly. The first three quarterly reports of Sanqi Mutual Entertainment in 2016 showed that Sanqi Mutual Entertainment's total revenue reached 3.668 billion yuan, a year-on-year increase of 12.12%; net profit was 752 million yuan, a year-on-year increase of 112.52%. Although the performance is relatively optimistic, Sanqi Mutual Entertainment's pan-entertainment layout is still in its early stages of development. From a business perspective, as of now, the revenue of Sanqi Mutual Entertainment's main business is still dominated by online games, and game revenue accounts for about 90% of the total revenue. This means that the pan-entertainment layout of Sanqi Mutual Entertainment still has a long way to go.

With the goal of 100 billion yuan hidden risks and dazzling performance, Yang Jun, senior vice president of Sanqi Mutual Entertainment Group, once expressed that he would build Sanqi Mutual Entertainment into a company with a market value of 100 billion yuan.

But at present, faced with competitive pressure from game platforms such as Tencent and Netease, Sanqi Mutual Entertainment still seems to be some way away from this goal. Behind the seemingly smooth capital expansion, there are also many risks hidden. Before establishing its subsidiary Aurora Network, Sanqi Mutual Entertainment acquired a web game research and development company at the end of 2012 and launched a series of web games "Chivalry Water Margin" to add more content creation. However, this game did not achieve a large success. This is undoubtedly negative for the development of Sanqi Mutual Entertainment.

Industry insiders said that games have their own life cycle. For game companies, continuously ensuring the development of high-quality game content is undoubtedly the core element to ensure the sustainable development of the company. Sanqi Mutual Entertainment continues to invest in mergers and acquisitions of game companies. Opening up the upstream and downstream industrial chains of game production is certainly conducive to the long-term development of the company, but the performance fluctuations of these companies will still make the layout of Sanqi Mutual Entertainment risky. After mergers and acquisitions of multiple projects, the adjustment of the company's internal structure and resource integration are also key factors related to the development of the company.

In addition, the strengthening of supervision of the film, television and game market has also made the pan-entertainment layout of Sanqi Mutual Entertainment full of unknowable factors. In August 2016, Sanqi Mutual Entertainment announced a major asset reorganization announcement, announcing plans to acquire the equity of Mokun Technology, Zhiming Network and Zhonghui Film and Television through cash payment and share issuance. However, the plan was questioned by the Shenzhen Stock Exchange, and the China Securities Regulatory Commission also issued a review opinion on this major asset reorganization. In October of the same year, Sanqi Mutual Entertainment adjusted its major asset reorganization plan, abandoned its acquisition of Zhonghui Film and Television, and continued to advance its acquisition plans of Mokun Technology and Zhiming Networks, but the plan was still not successful. On February 9, 2017, Sanqi Mutual Entertainment revised its previous plan and lowered the purchase price. Although the acquisition results have not yet been determined, the film and television market has become increasingly strict in its management of M & A investment events, which is not good for Sanqi Mutual Entertainment.

2016 - 2017 Sanqi Mutual Entertainment Chronicles Time Events April 2016 Sanqi Mutual Entertainment plans to jointly initiate the establishment of the "Mango Video Incubation Fund" with Mango Media June 2016 Sanqi Mutual Entertainment subscribed for 10% equity of Nanguang Film and Television 2016 In June 2016, Tibet Taifu, a subsidiary controlled company of Sanqi Mutual Entertainment, purchased a 7% stake in Mango Mutual Entertainment. In July 2016, Tibet Taifu, a subsidiary controlled company of Sanqi Mutual Entertainment, acquired a 15% stake in VR game developer Tianshe Culture. August 2016, Sanqi Mutual Entertainment plans to acquire Mokun Technology, Zhiming Network, In October 2016, Sanqi Mutual Entertainment canceled the acquisition of Zhonghui Film and Television's equity and continued to acquire Mokun Technology, Zhiming Network's equity in November 2016. Tibet Taifu and Fuhai Wansheng, a wholly-owned subsidiary of Sanqi Mutual Entertainment, plan to jointly fund the establishment of a cultural industry fund. In December 2016, Zhonghui Film and Television issued RMB ordinary shares to Sanqi Mutual Entertainment in January 2017. Sanqi Mutual Entertainment passed the wholly-owned subsidiary Tibet Taifu Fu participated in the establishment of Guangzhou Good Guy Phase I Media Partnership. In February 2017, Sanqi Mutual Entertainment will subscribe for 2.3841% equity of Xinxin Network for 100 million yuan. In February 2017, it lowered the valuation of Mokun Technology to 1.39 billion yuan, which is valued at Zhiming Network. The valuation remains unchanged

Editor: Nancy