The Corporate Governance Review

Executive Summary

In January 2022, Microsoft announced that it would be acquiring Activision Blizzard for approximately $69 billion. This is one of the highest acquisition amounts in the history of the technology and gaming industries. The United States, European, and United Kingdom governments all became interested in this deal due to the antitrust implications.

The acquisition was motivated by the desire of Microsoft to gain a competitive advantage in the gaming industry. Specifically, they wanted to increase their competitive advantage by acquiring franchises such as Call of Duty.

Corporate Background

Microsoft is one of the greatest technology companies in the world. As a result, they have become a major competitor in the video game industry, along with companies such as Sony and Nintendo.

Activision Blizzard was one of the largest video game publishers in the world prior to the acquisition. They are the creators of some of the most successful video game franchises, including Call of Duty, World of Warcraft, and Overwatch.

Strategic Rationale

Microsoft wanted to increase the value of its gaming and subscription services through this acquisition. By acquiring Activision Blizzard, Microsoft would increase the value of its Game Pass subscription, as it would have additional exclusive gaming content. Furthermore, Microsoft would also gain a strong foothold in the mobile gaming industry through the acquisition of mobile game phenomenon Candy Crush by Activision Blizzard’s subsidiary, King.

Financial Implications

The $69 billion that Microsoft invested in Activision Blizzard is a major commitment of capital.

The financial benefits that would result from the acquisition of Activision Blizzard by Microsoft would include increased subscription revenue, and the increased ownership of intellectual properties.

Regulatory and Antitrust Concerns

The regulatory authorities in the United States, the European Union, and the United Kingdom became interested in the acquisition because it could potentially reduce the level of competition in the gaming industry. The governments were most concerned about Microsoft potentially limiting the availability of Activision games on competing gaming consoles and platforms.

Governments such as the FTC and the CMA began to investigate the acquisition to determine if it would be detrimental to the consumer.

Governance Assessment

The board of directors for Microsoft was responsible for determining if this acquisition was a wise one. Such a significant purchase requires careful consideration.

Although the acquisition will provide Microsoft with a stronger competitive position, it also introduces some uncertainty as to whether the acquisition will be approved by regulators.

Conclusion

The acquisition of Activision Blizzard by Microsoft is a major development in the corporate and regulatory landscape of the technology industry. As more governments begin to scrutinize the activities of the technology companies, it is essential for them to consider the implications of these decisions on competition and consumers.

This case study further helps to reveal the importance of corporate governance and regulatory awareness in the technology industry.

Sources

Financial Times
Bloomberg
Microsoft Investor Relations
FTC regulatory filings
SEC filings

Author: Roman Steffl
Founder, The Corporate Governance Review