Microsoft purchased Blizzard Activision last week for a reported $69B, the largest acquisition in tech, ever, and at a 45% premium of its market cap. Wow.
Shortly afterward, the Department of Justice and the Federal Trade Commission launched a joint review of antitrust merger guidelines, citing evidence that industries are becoming increasingly more centralized, thus less competitive. Fittingly, the announcement was made on Twitter. Nothing was specifically noted of the Activision-Microsoft deal bit it is strongly suspected, so we'll have to wait and see if it becomes part of the investigation or not.
The idea that this merger reflects a 'concentration' is curious. First of all, it's a vertical move. Microsoft sells consoles not games. And second, gaming is serious business but relatively small in the context of technology. Yes, 250-350 million people play games (about the size of Snapchat) but 5 billion people use smart phones.
Maybe anti-competitiveness is a distraction, muddling the real storyline. Why would Microsoft make an acquisition at such a high price and premium?
Could access to a 300 million person market offset the 45%? How about better integrating the hardware/software experience for their customers? Or perhaps incorporating offerings like Call of Duty legitimizes the more contemporary position they've been trying to establish with the Surface tablet, creating a new relevance and opening to a market where they can sell a lot more products. Any of these scenarios alone could generate returns in excess of the multiple paid.
Microsoft is certainly seeking a competitive advantage, but it seems more strategic than structural.
