No Deal – Update on the Microsoft-Activision Deal
One of the hottest regulatory debates underway in the world is Microsoft’s attempt to acquire Activision Blizzard, which would go down as one of the largest deals in history. Activision is a video game developer you are likely familiar with considering their collection includes the Call of Duty series, World of Warcraft, and even Candy Crush. The popularity of these games is well reflected in the company’s market cap, which sits at $60.635 billion as of last night.
The purchase was seen to tickle the feathers of regulatory agencies across the world, with the Federal Trade Commission filing a lawsuit against the company and British regulators reviewing the deal to approve or deny it. Microsoft attempted to negotiate with regulators regarding concerns they had about the deal, but the UK might have dealt a fatal blow on Wednesday.
The Competition and Markets Authority rejected the deal, citing that it would hurt competition in the industry in the UK, which has been the prime concern for a while. With the acquisition of Activision, Microsoft now has the rights to the entire library, meaning they can perform moves like making Activision games exclusive to their XBOX console to cut off competitors. Antitrust lawyers believe that an appeal will likely fail and has a high bar to be overturned, meaning that this deal will likely not fall through. This is furthered by the fact that Britain’s decision now bolsters the effort in the United States from the FTC to block the deal, and Big Tech as a whole loses from this ordeal as the regulatory hammer is being slammed now.
As for the two companies involved, Activision will receive a $3 billion breakup fee if the deal ends up failing, and analysts believe that the company would look to become a buyer as they continue to report good results and expand their catalog. For Microsoft, it would mark another failed effort from their end to expand their presence in the cloud gaming area, where there is a lot of potential.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.