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M&A: Microsoft’s acquisition of Activision Blizzard

M&A: Microsoft’s acquisition of Activision Blizzard

Marie Ade


Reading time: five minutes

This LCN Blog post will give you a breakdown of the recent acquisition, explaining the reasons behind the purchase and the benefit the two companies aim to derive, as well as the surrounding issues.

I will briefly explain key terms that tend to come up in commercial news, especially for those who are just getting into developing commercial awareness. M&As and antitrust are major practice areas of many City law firms, and you may be asked to talk about a recent deal, so use articles like these to help you.

If you’re interested in M&A’s, check out the solicitor’s practice area profile via LawCareers.Net.


In January 2022, Microsoft announced its acquisition of Activision Blizzard, which is a popular video game developer, known for making games like:

  • Call of Duty;
  • World of Warcraft;
  • Diablo; and
  • Candy Crush.

Microsoft is part of the Big Tech; five of the largest, most dominant tech companies, and this is Microsoft’s biggest deal to date, costing the company $68.7 billion.

The acquisition is set to close in June 2023 as the companies seek approval from regulators. Simpson Thacher & Bartlett LLP are legal advisors for Microsoft, and Skadden, Arps, Slate, Meagher & Flom (UK) LLP is advising Activision.

This deal is a vertical merger whereby two non-rival companies that are in the same supply chain merge; in this case, it is the merging of Microsoft's distribution system and Activision’s content. It can also be characterised as a horizontal merger, where the companies merging are competitors, since Microsoft also develops games (via Xbox).

Given that the video-game sector has around three billion users worldwide (especially following the boom during the pandemic) and is larger than the movie industry, it’s a growth area that larger tech companies may, if they haven’t already, want to tap into.

Reasons behind the acquisition: what’s in it for Microsoft and Activision?

Microsoft hopes to advance into metaverse; a 3D virtual world that tech companies are competing to build. The gaming industry is likely to have a major role in this endeavour, so having Activision under its wing would be beneficial.

Additionally, this deal will rank Microsoft, based on revenue, as the third-largest gaming company (the first two being Sony and Tencent), and give Microsoft access to Activision’s community of users (400 million monthly) in addition to its 25 million subscribers on Gamepass on Xbox (which has been compared to Netflix in that it provides an array of games).

Microsoft will also receive content for its Xbox gaming console, which for many years has been outperformed by Sony’s PlayStation.

Finally, the access to games across multiple platforms will strengthen Microsoft's competitive power, especially in the mobile gaming market, given that Activision owns King, a phone game developer.

According to Microsoft News, 95% of gaming takes place on mobiles and is a market that’s set to rise even post-pandemic (given that we carry phones everywhere, but cannot do so with consoles or computers), so this deal will likely give Microsoft a foothold in this area against competitors like Sony and Tencent.

As for Activision, according to its CEO, the “proliferation of platforms and new forms of distribution had made it difficult even for companies as big as his to keep pace with the technology requirements of today’s gaming market”. Therefore, it alone would not have had resources like the Big Tech or other top gaming companies to keep up with today’s existing competition.


Corporate culture at Activision

Allegations and lawsuits based on sexual harassment and discrimination prior to the announcement of the acquisition had led to the decreased share price of Activision. There were internal changes (i.e removal of employees) to respond to these issues, and Microsoft in completing its due diligence wanted to ensure the controversy was resolved.

Microsoft offered a takeover bid when Activision’s stocks were down, and these accusations may have contributed to the company being even more open to this deal.


With such a massive deal, there have been antitrust concerns (antitrust policies aim to prevent monopolies and unfair business practices) and the potential damaging effect on the gaming sector.

Given the extreme scrutiny that the Big Tech companies are experiencing from organisations like the Federal Trade Commission (FTC) and Department of Justice’s antitrust unit in the US, it can mean that this acquisition may face challenges from antitrust agencies. The concern is that large “tech companies buy their way to the top of important new markets”.

However, in response to claims that this deal will disadvantage competitors, in February Microsoft pledged that its games will be distributed openly and reassured that it does not intend to remove top-rated games like Call of Duty from PlayStation. This meant that it could be played exclusively on Microsoft’s Xbox console. It’s now too early to tell what will happen with antitrust, but it’s worth keeping an eye out on how regulators deal with this acquisition.


Even though this is the largest tech deal, for a company with a market cap of $2.2 trillion (value of a company as determined by the stock market), it seems like a sensible move, and even if it doesn’t work out, it likely won’t cause a major dent in Microsoft’s business.

This acquisition may even signal the beginning of a new wave of M&As in the gaming industry, particularly if other companies (e.g Sony) would like to maintain their competitive advantage. As for the impact on antitrust regulation, this deal could “shape rules around vertical mergers,” especially since “the FTC last year withdrew 2020-vintage guidelines for these types of tie-ups for being too lax”.

Lastly, according to newspapers, there are questions of whether deals like this prevent innovation and diversity of games, and disadvantage smaller/indie game developers who lack support of large tech corporations.