Economically correct, but with a risk that is difficult to calculate.
(Photo: dpa)
If a company spends almost 70 billion dollars, the company knows what it is doing. Executive Board, Supervisory Board, in case of doubt the shareholders – everyone must be convinced. Also through legal opinions.
If Microsoft spends $68.7 billion over the next 18 months, making game developer and publisher Activision Blizzard its largest acquisition in company history, it knows exactly what it’s doing.
You know each other, you appreciate each other – Activision Blizzard also develops blockbuster games for Microsoft’s Xbox console in series. The gaming market is the fastest growing entertainment market, with games grossing more than Hollywood movies.
In addition, the pressure to consolidate is growing from companies willing to buy, such as the world market leader Tencent. It’s the perfect time economically. Actually.
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Because the game developer has big problems: The Blizzard part of the listed company is at the beginning of the processing of a scandal about sexual harassment and abuse of power. The tasteless term “Cosby Suite,” which executives once gave to a hotel room where they were reportedly sexually harassing female employees, will forever stick with the company. According to the reports, the share lost around 30 percent. Microsoft was able to prepare its offer well – and provided the purchase price with a risk discount.
Microsoft brings a lot of trouble into its own house
The question is whether Microsoft can seriously calculate the consequences. Strikes by the workforce and investigations by US authorities will probably not allow Activision Blizzard to rest until further notice. Activision CEO Bobby Kotick has so far resisted all calls for his resignation. Absolute willingness to clarify is not recognizable.
Kotick will now also accompany the takeover and, according to insider reports, will resign afterwards. In this way, the CEO becomes an insurance company: if the scandal escalates, he sits close to the emergency exit. If the proceedings burst or an agreement is reached out of court, Microsoft can press ahead with the work-up and declare it over with Kotick’s regular resignation.
From the industry it is said that Microsoft can and will clean up Activision Blizzard. However, lawsuits that are still to be expected in the USA have the potential to be devastating. Bayer bought Monsanto for $66 billion, estimating the legal risks related to ongoing glyphosate lawsuits to be manageable. The problem then was not the use of money, but the loss of investor confidence. Even one of the most valuable stock exchange companies in the world cannot afford drastically falling share prices.
Microsoft needs to be careful if it wants to avoid its Monsanto moment. It must not trivialize the allegations, as is common in the gaming industry, which is often still characterized by a “frat boy” mentality. It must seize the opportunity to exemplify real cultural change. The emotional fan community needs to learn to read it.
Because customers are fans – and they are organized. It’s not just “net screams”. How powerless companies are when communities challenge “the big ones” was shown a year ago: Gamers colluded via the Reddit forum Wall Street Bets to buy shares and thus manipulate the price of Gamestop shares, among other things – and brought entire hedge funds to their knees with this unpredictability.
Gamers are no longer a high-end demographic that has to take what they can get. They are heterogeneous, demanding, passionate and very attentive customers.
Microsoft is investing almost 70 billion dollars in their currently most scandalous provider.
More: Microsoft is acquiring game maker Activision Blizzard for nearly $70 billion.