UK CMA Rejects $69 Billion Microsoft-Activision Deal: Where Next for the UK M&A Market?

The Competition and Markets Authority (CMA) has prevented the landmark Microsoft Activision deal due to concerns the M&A would result in reduced innovation and fewer choices for UK gamers. In light of the announcement, Claire Trachet, CEO and founder of business advisory, Trachet, highlights the significance of the decision and what this will mean for the future of the UK M&A market.

Despite Microsoft proposing to address these concerns by vowing to provide competitors – Sony and Nintendo – with access to their cash-cow first person shooter franchise, Call of Duty. The CMA stated that Microsoft’s proposal contained various shortcomings, not related to competition distortion. This included not sufficiently covering a great variety of gaming service models or being open to other providers who potentially want to offer versions of these games on other consoles or operating systems outside of Microsoft’s product suite.

Microsoft has announced that it will be appealing against the CMA’s decision. However, the CMA remains one of three regulators to rule on this decision, meaning the decision has the potential to damage the entire the takeover.

Claire Trachet, CEO and Founder of Business Advisory, Trachet, comments on the $69 billion Microsoft – Activision deal and the implications this will have on the UK as a global M&A destination:

“The CMA’s decision to block Microsoft’s M&A is a severe blow to the tech giant as the deal had the potential to boost the company’s status in the gaming industry by adding blockbuster franchises like Call of Duty and Candy Crush Saga to its catalogue. Conversely, Microsoft missing its 18th July merger deadline will mean it will owe Activision a £3bn termination fee – a huge blow to the company. While this would have been extremely positive for the likes of Microsoft, the CMA had to consider how the merger would impact other gaming service models.

“As a result, the verdict acts as a critical moment on the global M&A stage, as the deal has a direct impact on the attractiveness of the UK as an M&A destination – considering the adverse consequences of not carrying out a takeover offer. While the Microsoft–Activision merger is the biggest all-cash deal in tech history, the blow dealt by the CMA may mean that other companies looking to venture out in such a way may refrain from doing so.

“However, the increase pre-covid of inward foreign investment to the UK shows a positive direction for M&A where many predicted a halt. Today, there is a growing number of investors who are sat on a dry powder pile having paused investments due to uncertainty in 2022. This means there are significant opportunities on the horizon, and now is the moment to prepare and get deal ready as optionality will increase in H2 of this year.”