Microsoft shocked the technology and gaming world on January 18 when it announced it was acquiring Activision Blizzard in a $68.7 billion deal, by far the largest ever in gaming. Activision Blizzard, one of the world’s most legendary developers, has struggled with multiple scandals for months, including the California lawsuit accusing the company of creating a culture of “constant sexual harassment,” an explosive Wall Street Journal report suggests that CEO Bobby Kotick was aware of both that harassment and sexually harassed employees themselves, as well as labor protests from Duty workers.
Microsoft’s Phil Spencer, the company’s Xbox chief at the time, reportedly responded to the accusations made by the company WSJ article two days later in an email to Xbox staff, saying he was “disturbed and deeply disturbed by the horrific events and actions” at Activision Blizzard and that Microsoft is “evaluating and reviewing all aspects of our relationship with Activision Blizzard.” making ongoing proactive adjustments”. But based on a timeline of the acquisition that Activision Blizzard has now set out in its official merger proposal to its own shareholders (via CNBC), it appears that Spencer’s idea of changing its relationship with Activision Blizzard was to almost immediately offer to to buy the troubled company.
And according to the documents, he wasn’t the only one interested in a deal.
The first talk of a takeover took place between Spencer and Kotick on November 19, just three days after the WSJs report on Activision Blizzard’s CEO and a single day after Spencer said he told Xbox staff he was “deeply troubled.” It may even have come up as part of the same conversation.
During a conversation on another topic between Mr. Spencer and Mr. Kotick, Mr. Spencer raised that Microsoft was interested in discussing strategic opportunities between Activision Blizzard and Microsoft and asked if it would be possible to speak with Mr. Spencer. Nadella the next day,” the document reads. The next day (a Saturday), Microsoft CEO Satya Nadella was apparently more explicit, indicating that “Microsoft was interested in exploring a strategic combination with Activision Blizzard.”
That was the start of nearly two months of talks between Microsoft and Activision Blizzard about what would be the acquisition announced on January 18, and you can read the full 10-page smash hit in Activision Blizzard’s dossier, starting on page 31 ( The copy of the document embedded at the bottom of this article should start there.) I’ve always wondered what goes on behind the scenes to enable these kinds of mega acquisitions, and the document provides an illuminating look at driving and deal to bring this deal to a successful conclusion.
One thing I found interesting was that Activision Blizzard was in touch with four other companies and one person about some sort of deal besides Microsoft. Disappointingly, they are only listed as companies A, C, D, and E, and the individual is listed as “Individual B”, so we don’t know who else might own it Duty† None of those deals went through for various reasons — company E, for example, said it couldn’t do a full-scale acquisition of Activision Blizzard — and Microsoft quickly and aggressively pursued its deal, getting the terms together before some other companies even got around to it. had joined The photo.
Activision Blizzard’s SEC filing also includes the terms of the merger agreement, indicating that Microsoft would jump in if the merger is blocked by government regulators — it would pay Activision Blizzard a termination fee ranging from $2 billion to $3 billion if the acquisition closes due to an “Injunction Pursuant to Antitrust Laws.” If Activision Blizzard’s shareholders do not vote to approve the merger, it may have to pay Microsoft a $2.27 billion termination fee.
While it’s uncommon for mergers like this to be actively blocked, we have a recent example: Nvidia’s $40 billion deal to acquire Arm from SoftBank fell apart due to regulatory challenges. The Federal Trade Commission (FTC), which filed a lawsuit to block Nvidia’s purchase of Arm, specifically noted in a statement this week that the failed merger “represents the first shutdown of a litigated vertical merger in many years.” While Microsoft says it’s still early in the Activision Blizzard deal, it’s “so early in the process that we’re not yet at a point where we’re getting real feedback.” [from the FTC]Microsoft president Brad Smith told reporters CNN † there is always the possibility that the FTC and other regulatory authorities will intervene.
While Kotick is expected to leave the company if the deal goes through, the document also shows that he will leave with a huge fortune anyway: With 4,317,285 shares in Activision Blizzard, he stands to win $410,142,075 based on the $95 a share Microsoft plans to pay — and he’s got an extra “golden parachute” worth $14,592,302 if he decides to stay and Microsoft pushes him out anyway. That doesn’t count his 2.2 million stock options, which can be worth hundreds of millions of extra dollars depending on how much they cost to exercise.
The document also reveals that Call of Duty: Vanguard2021’s annual release in the mega-popular series, underperformed and fell short of its fourth-quarter projections.
Disclosure: Casey Wasserman serves on the board of directors of Activision Blizzard and on the board of directors of Vox Media, the parent company of The Verge.