June 28, 2022

Microsoft makes biggest acquisition in history, is the world’s third largest gaming company: 6 reasons behind the all-cash deal and more

Microsoft makes biggest acquisition in history is the worlds third largest gaming company 6 reasons behind the all-cash deal and more

Microsoft has made its largest-ever acquisition. The company is buying ‘Call of Duty‘ maker Activision Blizzard for $68.7 billion. It is also the largest-ever deal in the history of the gaming industry. Microsoft said that it expects the deal to close in 2023 fiscal year, which starts in July. The deal is bigger than Microsoft’s $26 billion acquisition of LinkedIn. The deal also breaks the record set by Take-Two Interactive’s acquisition of mobile game publisher Zynga for more than $11 billion. Here are all key details about the deal

It’s an all cash deal

The deal announced by Microsoft is an all-cash acquisition. Microsoft’s offer of $95 per share represents a premium of 45% to Activision’s Friday close. Activision’s shares were last up 27% at $83.11.

What Activision Blizzard brings to the table for Microsoft

  • The all-cash $68.7 billion deal will turn Microsoft, the maker of the Xbox gaming system, into one of the world’s largest video game companies.
  • It will help the company compete with tech rivals such as Meta, formerly Facebook, in creating immersive virtual worlds for both work and play. Facebook is considered the leader in the so-called metaverse, the name given to the virtual world.
  • Activision’s library of games may help offer Microsoft’s Xbox gaming platform an edge over Sony’s Playstation, which has for years enjoyed a more steady stream of exclusive games.
  • According to Newzoo, Microsoft’s gaming market share was 6.5% in 2020 and adding Activision may take it to 10.7%.
  • The acquisition pushes Microsoft past Nintendo as the third-largest video game company by global revenue, behind Sony and Chinese tech giant Tencent.
  • Microsoft said that the acquisitions will help it beef up its Xbox Game Pass game subscription.

Microsoft CEO Satya Nadella on acquisition
“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft Chief Executive Satya Nadella said.

Who will head the new division
The Activision business unit would then report to Phil Spencer, who has led Microsoft’s Xbox division and will now serve as CEO of Microsoft Gaming. “Upon close, we will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass, both new titles and games from Activision Blizzard’s incredible catalog,” says Microsoft’s CEO of gaming Phil Spencer.

May lead to anti-trust scrutiny, similar to Google and Facebook, for Microsoft
Microsoft has so far managed to avoid the type of scrutiny faced by Google and Facebook. However, the deal would make it the world’s third largest gaming company. This may put it under the radar of anti-trust regulators in the US and Europe. However, Microsoft reportedly has agreed to pay a $3 billion break-fee if the deal falls through, suggesting that it is confident of winning antitrust approval.

What are the biggest hits of Activision Blizzard

The biggest games are: Call of Duty and Candy Crush,

Activision Blizzard has been facing allegations of sexual harassment of employees
The company has been facing allegations of sexual harassment of employees and misconduct by several top managers, leading to a huge slump in its shares. The company is still addressing those allegations and said that it had fired or pushed out more than three dozen employees and disciplined another 40 since July. In a conference call with analysts, Microsoft CEO Nadella said, “It’s critical for Activision Blizzard to drive forward on its renewed cultural commitments,” adding “the success of this acquisition will depend on it.”

Microsoft has been building gaming arsenal
Microsoft has been making inroads in the sector. It has been making investments including buying “Minecraft” maker Mojang Studios and Zenimax in multibillion-dollar deals in recent years. Last year, Microsoft spent $7.5 billion to acquire ZeniMax Media, the parent company of video game publisher Bethesda Softworks, which is behind popular video games The Elder Scrolls, Doom and Fallout.

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