Business Week reports that Tecmo, uneasy with the prospect of being acquired by much larger Square Enix, has sought refuge in the arms of fellow small publisher Koei:
When Japanese video game developer Square Enix unveiled its "friendly" offer to buy rival Tecmo last week, analysts and investors applauded. The two companies seemed a natural fit: Square Enix’s Final Fantasy and Dragon Quest series had a huge following among diehards in Japan, while Tecmo’s Ninja Gaiden and Dead or Alive fighting games were popular in the U.S. and Europe. To sweeten the deal, Square Enix President Yoichi Wada pledged to preserve the Tecmo brand. He gave Tecmo’s management a week to think it over.
At the deadline, Tecmo told Square Enix "thanks, but no thanks," and said it was exploring a merger with Koei. From the report:
Tecmo didn’t give a reason for going with Koei. But size appears to have been one issue: Rather than getting swallowed up, Tecmo may have wanted something closer to a marriage of equals…
Industry executives say Japan’s midsize game developers are prime takeover targets. Many of them have a strong record at home but limited exposure overseas. A suitor with a worldwide network—particularly in the U.S. and Europe—could take a niche Japanese developer stuck in a stagnant market and create a global mainstream franchise.
This one’s not over, at least not yet. Square Enix has asked Tecmo to explain how Koei’s deal was better for shareholders than its offer and may continue its pursuit of Tecmo.