Microsoft/Activision Merger Takes Giant Leap Forward

After a hasty court case, the Microsoft/Activision merger has taken a giant leap towards being closed.

The FTC wanted the merger to be halted, but today Judge Jacqueline Corley allowed the deal to go ahead. The FTC, she said, had failed to show that competition would be lowered because of the merger. In fact, the opposite is true.

She said: “This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted—perhaps even terminated—pending resolution of the FTC administrative action. For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary
injunction is therefore denied.”

That leaves just one major hurdle left for the deal to go through: the CMA in the UK. The authority has blocked the deal, and Microsoft has appealed the move. But the CMA is famously difficult to get around. They also stand completely alone now.

If they’re as poorly prepared as the FTC was in their case, the appeal should be a slam dunk. The result here depends on whether that appeal is granted and if the verdict is changed after the appeal – the CMA don’t have to change their mind.

On the other hand, Microsoft have supposedly been working on ways to close the deal around the CMA. This isn’t a surprise – they will have explored every single option. But it’ll be interesting to see if they have the patience and time to wait for the CMA to change its tune.

Microsoft/Activision – What Happens Next?

Officially, Microsoft and Activision have until the 18th of this month to close the merger, else they must renogotiate. This is partly why the FTC verdict was released so quickly – it usually takes three or four times as long to get to this point.

They can’t finish the deal in the US until the end of the week – the 14th.

So something has to happen over the next week. Either the UK has to accept the deal, completely reject the deal or Microsoft need to close around them.

Internet theorists – always to be believed – think closing around the CMA may well be cheaper than abandoning the deal. There would be a multi-billion dollar break-up fee if that were to happen. That bit, at least, is true. And after all the time and effort that we’ve taken to get to this point, there’s no way this is going to suddenly go away. Microsoft can’t afford for that to happen – it will impact on future deals.

And renogotiating the time for the deal to close isn’t particularly difficult, but is surely a second option after closing before renogotiation.

Here’s my prediction: the UK were banking on not being the only hold out. The evidence is against them. Political pressure is against them. Perhaps, just perhaps, the CMA “change their mind” within the next week, and all of this goes away.

It’d be cheaper, it’d be less embarrassing, and it’ll mean a closing by the 18th.