Today it was announced that Microsoft plans to acquire Activision Blizzard (NASDAQ: ATVI) for $68.7 billion. This is the largest video game deal ever and it will likely take some time to go through. Here are our initial thoughts.
• Activision Blizzard was looking in a weak position with internal turmoil. The thinking was the company would need to be split up with Activision, Blizzard, King as three separate parts. It was hard to imagine any company willing to swallow the whole pill. This is probably a best case for investors as it should maximize value.
• Long-term this shows Microsoft is operating at an entirely different level than Sony and Nintendo. Sony and Nintendo have huge presence in the existing game business, but those two smaller Japanese companies struggle to play in the higher strategic space the industry is heading.
• This is more about Microsoft competing with Google, Amazon, Apple, Facebook and others. This acquisition would immediately put Microsoft in a solid strategic position.
• Will this deal go through? Regulators will take a close look and franchises like Call of Duty may not be exclusive to Xbox platforms because of antitrust concerns. This deal will get a lot of scrutiny and like the Nvidia attempt to acquire Arm may take a long time and struggle to go through (Nvidia agreed to acquire ARM in late 2020 but government approval is difficult). Many territories where Microsoft looks to sell ATVI products will need to approve the takeover.
Note DFC Intelligence will be holding an investor briefing on the subject January 19 but a more detailed impact analysis will follow next month post fiscal earnings reports.
