Microsoft’s $69bn Acquisition of Activision Blizzard

By Nancy Huang (University of Melbourne) and Tudor Popescu, Bella Chen, Devashree Goenka, Jaden Wu, and Max Averbach (UChicago)

 

Overview of the deal


Acquirer: Microsoft

Target: Activision Blizzard

Implied Equity Value: $61.6 bn

Total Transaction Size: $68.7 bn

Closed date: Ongoing

Acquirer advisor: Goldman Sachs & Co. LLC

Target advisor: Allen & Company LLC


Driven by external factors of technology advancement and customers’ growing appetite in virtual reality gaming, Microsoft takes on an all-cash acquisition of Activision Blizzard, a renowned gaming company known for creating Candy Rush and Call of Duty. The vertical integration into the gaming industry is Microsoft’s attempt to adapt to the landscape of “Metaverse” as technology companies transition to a new internet generation. It's speculated that Blizzard games will be distributed solely through Microsoft platforms post-acquisition, allowing Microsoft to achieve its vision of a single subscription-based online service.


Company Details (Acquirer - Microsoft)


Microsoft is a multinational technology corporation founded in 1975 that currently has the second-highest market capitalization of any firm in the entire world. They specialise in computer software, personal computers, and other computer hardware like Xbox consoles. Microsoft's most known products include the Windows operating system and the Microsoft Office suite.


Founded in 1975, headquartered in Redmond, Washington, USA

CEO: Satya Nadella

Number of employees: 107,000

Market Cap: $2.273 trillion (as of 28/01/2022)

EV: $2.16 trillion

LTM Revenue: $184.9 billion

LTM EBITDA: $90.83 billion

LTM EV/Revenue: 11.70x

LTM EV/EBITDA: 22.79x


Company Details (Target - Activision Blizzard)


Activision Blizzard is an American video game publishing company headquartered in Santa Monica. A leading company in the competitive video game industry, Activision rivals similar giants like Sony and Tencent. The firm owns several significant intellectual properties, including blockbuster games and various Esport initiatives.


Founded in 2008, headquartered in Santa Monica, California, USA

CEO: Bobby Kotick

Number of employees: 9,800

Market Cap: $61.45 billion (as of 27/01/2022)

EV: $55.36 billion

LTM Revenue: $9.05 billion

LTM EBITDA: $3.69 billion

LTM EV/Revenue: 6.14x

LTM EV/EBITDA: 15.00x


Projections and Assumptions


Short-term consequences

Despite Microsoft’s claims of a brisk integration between its entertainment and devices branch and Activision Blizzard, many effects of the acquisition are unlikely to be apparent in the short term.