In 2007, pre-IPO companies such as Giant Interactive and NetDragon all expressed that their top priority after going public would be "acquiring outstanding domestic online game developers." However, a year later, the mergers and acquisitions (M&A) in the online gaming industry have not surged as imagined. A former employee of Shanda commented on this ebbing M&A trend, saying it was actually Shanda's "premeditated plan." Nowadays, acquiring a game operation company comes with an exorbitant price.
**Spending a Fortune to Attract Talent**
In July of last year, Shanda acquired Jin Tian Technology for RMB 1 billion, turning its founder, Peng Haitao, then only 23 years old, into a billionaire overnight. This story ignited excitement among many in the online gaming industry. Many companies boasted, "Jin Tian is worth one billion, so how much should my company be worth?"
What they didn't realize was that while they were asking these questions, Chen Tianqiao was quietly smiling because his goal had already been achieved. "Chen Tianqiao's purpose was to raise the threshold for acquiring online game companies," said the aforementioned former Shanda employee.
Shanda not only set a high price benchmark for its competitors but also instilled confidence in numerous online game developers, prompting them to "price themselves higher." In the eyes of the former Shanda employee, Jin Tian Technology wasn't worth RMB 1 billion because its top talent had already been poached by Giant Interactive. For a company that has products but no team, it is difficult to achieve sustained development and profitability.
**Achieving Big Goals with Minimal Investment**
In 2007, several online gaming companies raised substantial funds through IPOs, which made Shanda, always considering itself the leader in the online gaming sector, feel uneasy. After nearly a decade of development in this industry, there is still no monopolistic giant, and new enterprises continue to emerge. How to maintain its position is the most pressing concern for Shanda, as a pioneer in the field.
Shanda resolved this issue through the acquisition of Jin Tian Technology and the subsequent launch of its "18 Plan." On the 18th day of each month, numerous original online gaming companies would present their stories to Chen Tianqiao, hoping to join the embrace of the giant that is Shanda. However, aside from Peng Haitao, we haven't heard about many other storytellers.
In the eyes of the aforementioned former Shanda employee, Shanda's strategy to counteract latecomers was a brilliant move. "If everyone is acquiring, then I'll set the price first. If you want to buy, go ahead. As long as you can find good value-for-money 'goods' and get approval from your investors."
In reality, Shanda's investment was not as large as outsiders imagined. Gao Yu stated that the RMB 1 billion acquisition was not a one-time payment. Instead, it was done through a wager agreement: providing a portion of the funds upfront, setting commercial goals, and releasing further funds based on performance completion. "In fact, Shanda accomplished a significant feat at a very low cost by setting a very high benchmark for acquisitions."