What Microsoft’s Activision Setback Means for Deal Making

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The UK regulator’s decision to reject Microsoft’s $69 billion takeover offer for Activision Blizzard has surprised many who expected the deal to go through. This is especially because moves by the government agency Competition Markets Authority earlier this month suggest the deal could be successful.

But this decision only reinforces the current reality. At a time when dealmakers hope to revive the dying market for M&A, more aggressive regulators around the world present new challenges for corporate buyers.

The authorities continue to flex their growing regulatory power. The CMA has narrowed its investigation into the Activision deal to just one issue: cloud gaming, but letting Microsoft buy the Call of Duty maker would give the tech giant too much leverage in the video game market. Said it could be given.

According to Pablo Ibáñez Colomo, a law professor at the London School of Economics, what’s encouraging the authorities is how unlikely a successful appeal against that decision is. Courts hearing Microsoft’s appeals will primarily investigate whether the regulator took appropriate steps. This institutional advantage positions the agency as one of the most influential antitrust law enforcement agencies in the world, alongside agencies in the United States and the European Union.

Global regulators are now looking more closely at the dealIn the United States, it is due to a shift in ideology against big companies getting too big. Political reasons may also be taken into account. Consider Berlin’s scrutiny of Carrier’s acquisition of German heat pump maker Viessmann for about $13.3 billion.

The Big Deal is still on the table. For example, Swiss commodities giant Glencore is still Interested in purchasing Teck Resourcesat least $22.5 billion defeated a defensive move To Canadian mining company.

Deal makers still have a good chance if buyers of M.&A. (Just under 1% of his announced deals have been withdrawn this year, slightly lower than last year’s rate.)

Microsoft said Wednesday it would defend Activision’s bid. But with the July 18th trading deadline looming and shareholders seemingly unfazed by legal setbacks, some analysts believe the Xbox maker will eventually accept defeat and go for a $3 billion split. pay a fee, move on.

this is what is happening

US economic growth is slowing. The government is set to release data at 8:30 a.m. ET, showing that gross domestic product rose perhaps 1.9% in the first quarter, down from 2.6% the previous quarter. The data should give a clearer picture of whether investors are right to fear a possible recession in the second half of the year.

House Republicans pass debt relief bill. House Speaker Kevin McCarthy has gathered enough caucus members to just barely approve his proposal to raise the debt ceiling for a year and make significant spending cuts. The bill is unlikely to pass in the Democratic-controlled Senate, but it will strengthen his hand in negotiations with President Biden.

First Republic stock is still down. Shares of the beleaguered lender fell about 30% on Wednesday to close at $5.69. Management and advisers continue to believe that the federal government needs to play some role in devising solutions.

Samsung’s quarterly earnings fell 95%. On Thursday, the South Korean electronics giant Lowest operating profit since 2009, driven by weak demand for memory chips and other semiconductors. Still, we expect a recovery this year as Samsung cuts production.

Chinese authorities are questioning Bain & Company employees. The consulting giant said officials visited its Shanghai office this month and are “cooperating where necessary.” It was not specified what the investigation was focused on. The raid, which follows a similar move against the offices of another US consulting firm, reflects economic tensions between Washington and Beijing.

AI is a big buzzword in tech company bottom line

Big Tech had extended its 2023 rally on Thursday.

Meta share surged over 12% prior to market launch Earnings beat expectations last quarter as digital advertising rebounded, user numbers increased and investors turned their attention to growth prospects driven by artificial intelligence due to job cuts.

Microsoft and Google set a bullish tone on Tuesday. The technology giant’s shares rose after the company reported solid results and detailed a vision for how it would incorporate AI into its core software and search products. Amazon will release its quarterly results on Thursday to give investors an update on the company’s position in the AI ​​arms race.

Microsoft CEO Satya Nadella Mention “AI” or “OpenAI” at least 29 times in his 15-minute introductory remarks to analysts on Tuesday. He called his AI “alternation of generations” and is seen as the company’s biggest chance to catch Google in search.

Meta CEO Mark Zuckerberg spent about six minutes. Talk about AI in Wednesday’s intro, reported by Bloombergand just 90 seconds in the metaverse, the immersive world the company is building is slow to take off.

AI ‘affects all of our apps and services’ He told analysts, adding that it is already “improving monetization.” Instagram is one example. “Since launching Reel, AI recommendations have increased his time spent on Instagram by more than 24%,” said the company’s big growth engine, the short video clip feature, and Tick Tock.

Another promising metric: In March, an average of 3 billion users logged into Facebook, Instagram and WhatsApp each day. the company saidhelped reverse the sales decline of the last three quarters.

One thing to watch out for is cost. Both Microsoft and Alphabet keep costs downHowever, advances in AI require significant investment. Meta said it will grow its generative AI team this year and invest more in technology. The cost will be “slightly higher”.

Disney v. DeSantis goes to court

The battle between Disney and Gov. Ron DeSantis entered a militant new round Wednesday after the media giant sued the governor of Florida and the board that oversees government services at the state’s resorts. , accusing him of conducting a “targeted campaign of government retaliation,” filed a First Amendment lawsuit. The bigger question is whether Mr. DeSantis’ potential presidential hopes will be undermined in this fight.

Disney accused DeSantis of weaponizing government power This was in retaliation against the company for criticizing the “Don’t Say Gay” law, a state action that banned discussion of sexual orientation and gender identity in some schools. “In America, the government cannot punish you for voicing your opinion,” the complaint reads.

DeSantis spokesman Taryn Fenske dismissed the lawsuit as an attempt to “undermine the will of Florida voters.”

DeSantis sees political merit in taking on Disney. The company is one of the state’s largest employers and says it has allocated $17 billion to expand over the next decade. But he struck it down on that his stance on social issues to strengthen his support among local conservatives.

However, his tactics could be damaging in a nationwide campaign. vote — contain one each Harvard/Harris and another Reuters/Ipsos — is generally divided on whether or not this has helped appeal to voters.

Potential rivals for the Republican nomination watch the opening:

• Former President Donald Trump called Disney’s fight a “political stunt.”

• Former Governor of New Jersey Chris Christie said to be anti-conservative.

• Former South Carolina Governor Nikki Haley also pitched the business. “oi@disney, if you want to leave Florida, my home state will happily accept your 70,000+ jobs. ”she tweeted“SC is not awake, but we are not sacred about it either.”

Tucker Carlson breaks silence

Two days after being fired from Fox News, Tucker Carlson popped up on Twitter… 2 minute video It didn’t address his shocking expulsion. But he may have offered a hint as to what to do next after Rupert Murdoch’s sudden withdrawal from his media empire.

Carlson criticized the state of political discourse, “Both political parties and their donors have come to a consensus about what benefits them, and they are actively colluding to stop conversations about it.”

“Where can we still find Americans telling the truth? There aren’t many places left,” Carlson added. “But there are some. And that’s enough.” He concluded with “See you later.” He suggested that he might return to public forums, either on his own or as part of the news media.

Details about Carlson’s dismissal have emerged. Just before the Fox News defamation trial began, the Fox board belatedly learned more about the extremely offensive and vulgar remarks made by the moderator in private, which the legal evidence provided. It was reportedly revealed as part of the disclosure process.

We don’t yet know the full extent of what he said, but news outlets have challenged the court-ordered redaction of private messages, and correspondence continues to occur in a lawsuit filed against Fox News by voting software maker Smartmatic. There is a possibility.

speed lead

bargain

• More and more companies are struggling rebuild their debt They go out of court to avoid bankruptcy, but many still can’t avoid bankruptcy. (FT)

• Private Equity Owners of Millennium Trust may put its retirement plan custodian up for sale at a price tag as high as $8 billion. (Reuters)

policy

best of the rest

• Pras Michel, founding member of hip-hop group Fugees, has been found guilty of carrying out an illegal lobbying and political donation scheme on behalf of the Malaysian businessman behind the 1Malaysia Development Berhad scandal. (NYT)

• Twitter’s mass removal of verification check marks has led to an increase in misinformation on social networks. (NYT)

• Wynn BischoffThe decorated British banker who served as chairman of Citigroup died on Tuesday. he was 81 years old. (Reuters)

• “Watch AI learn to read and write only Jane Austen.” (NYT)

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