Microsoft Corp’s potential acquisition of Activision Blizzard is being hailed as one of the most remarkable comeback stories in the history of mergers. Initially faced with regulatory challenges and blockades from US and UK authorities, Microsoft was able to revive the deal by creating a confrontation between the two regulators. By offering to sell the cloud rights of current and future Activision games to Ubisoft Entertainment, Microsoft persuaded UK regulators to initiate a fresh investigation into the transaction. If the deal is approved, it will establish Microsoft as a major player in the gaming industry and serve as a blow to ambitious competition regulators in the US and UK.
The process leading up to Microsoft’s success involved a series of strategic moves. The acquisition was first announced in early 2022, but encountered obstacles when US regulators filed a challenge in December of the same year. In April, UK antitrust enforcers blocked the deal, citing concerns about competition in the gaming market. The US Federal Trade Commission scheduled a trial for August, adding pressure on Microsoft to close the acquisition before the deadline or face a $3 billion breakup fee.
To outmaneuver regulators, Microsoft employed a tactic of suggesting that it would proceed with the acquisition despite the UK veto. This bluff prompted the FTC to file a federal lawsuit, confident that they would win. However, behind the scenes, Microsoft was secretly seeking peace with UK regulators and had no intention of circumventing the veto. The situation remains unresolved, with UK regulators conducting a new probe and the FTC appealing a court ruling in favor of the acquisition.
Microsoft’s persistence has brought it back from the brink, and the company is now on track to meet a new completion deadline in the fall. However, there is no guarantee that the fresh proposal will address concerns and gain approval. Throughout this process, Microsoft faced opposition from Sony, the leading gaming console manufacturer. Sony feared that Microsoft’s ownership of Activision would enable them to remove popular titles from PlayStation, risking significant revenue loss.
In its lobbying efforts, Microsoft made deals with rivals Nintendo and Nvidia to keep Activision games on their platforms for a decade, while arguing against divesting Call of Duty as a remedy. This strategy helped convince EU regulators to approve the acquisition, with conditions including licensing Activision content to EU game-streaming providers and compliance oversight.
The journey to acquiring Activision Blizzard has been filled with twists and turns, but Microsoft’s determination has brought it closer to success. Now, all eyes are on UK regulators as they review the revised offer and decide the fate of the deal. Regardless of the outcome, Microsoft’s resilience and strategic maneuvering have secured its position in the gaming industry and challenged regulatory authorities along the way.
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