An Acquisition Deal in the Gaming World

Abstract

The gaming industry has seen acquisitions big and small. In recent years, Microsoft's acquisition of Activision Blizzard topped the list with a total value of 68.7 billion dollars. This paper focuses on the deal as a case study, with reference to the value of both companies and potential risks. It aims to explore the motivation of both parties based on their perceived pros and cons of this acquisition, so as to delineate the logic behind this gigantic acquisition. After conducting multiple studies on both companies, this paper finds the deal worthwhile indeed for both sides, despite the higher potential risks imposed on Microsoft. Activision Blizzard has seen its public image tarted in recent years by rampant sexual harassment rumors and the resultant massive outflow of employees. This decreases its leverage over Microsoft and weakens its position in negotiations. On the other hand, appreciating the profit-making potentials of several big game IPs owned by Blizzard, Microsoft is willing to make a general purchasing offer at a premium (Activision Blizzard market value of about $61.6 billion, but Microsoft acquired with $68.7 billion). This is despite relevant concerns raised about the potential risks of digesting the latter’ s bad reputation. Overall, the paper argues that such compromises are cost-efficient for Microsoft, since the deal helps it gain a firm foothold in the gaming industry. Based on the study findings, the essay also brings into discussion many other factors required to complete a successful acquisition.