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stock.adobe.com – Mia Stendhal
In our polarized political climate, there are few topics on which people can agree. A recent dramatic development is the desire to regulate certain business sectors and practices.
This seems to have allowed the Federal Trade Commission (FTC) and, to a lesser extent, the Securities and Exchange Commission (SEC) to take a more aggressive – in my view, activist – stance away from free markets and globalism. .
As a former executive in the game publishing space, I have seen how mergers and acquisitions can help businesses reach their goals. In light of recent antitrust developments, here’s what business leaders need to know.
Why should you pay attention?
This new approach was seen in the FTC’s recent moves to block Microsoft’s $68 billion (USD) acquisition of game publisher Activision Blizzard. Over the past several decades, vertical mergers have generally been permitted. In fact, Microsoft’s competitor Sony was allowed to buy game developer Bungie, which ironically both a former Microsoft holding and also a company that once had a sales, distribution and co-development agreement with Activision Blizzard (disclosure: I was an executive at Activision Blizzard’s business relationship with Bungie).
In the year By 2021, Microsoft will account for 53 percent of U.S. console sales — almost half of the market. Globally, Microsoft’s Xbox holds a 14.7% market share of console sales, far less than Sony’s 85% plus share. In terms of increasing mobile gaming share, Microsoft’s position is not dominant. Software/IP “uniqueness” in gaming—as well as music and streaming video content—has existed for decades without harming gamers. And, while that’s a concern, Microsoft has promised its competitors access to the bulk of Activision’s IP. call of duty, for 10 years. Games may soon be cloud-based, eliminating the idea of console platforms.
The companies initially argued that the structure of the FTC and the administrative tribunal before which Activis is being sued “undermine the Constitution, the separation of powers, and the Fifth Amendment’s due process clause.” As a longtime executive and business leader who has been part of many mergers and acquisitions, I agree.
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A few more reasons for the challenge and pushback are appropriate advice for business leaders reflected in the history of such efforts. Over the past two years, the FTC has lost most of its lawsuits, from the agency’s 2020 reversal of its lawsuit against Qualcomm to its loss of a lawsuit against Facebook and the 2022 ruling by an administrative judge against Altria and Illumina’s $7 rejection. billion (USD) merger with Grail. When faced with these losses, business leaders have decisions to make to help them stand their ground.
If this can happen to Microsoft, it can happen to you.
What can you do?
Speak up, hold on tight. Microsoft and Activision Blizzard’s response is an example of my recommended approach if your potential merger is challenged: fight back and hold your ground. They will probably win in the courts and in the court of public opinion.
Replay past offers and show customer value. If you’re considering buy-to-let growth, you’re likely to be more challenged as recent government moves suggest. In these cases, I recommend transactions that structurally mirror what the case law previously allowed. And I recommend taking a path that involves mobilizing consumers to support the deal. FTC reviews include a “public comment” process and timeframe for consideration in decision-making.
A divided federal government for 2023 should make businesses push harder against the FTC. I advise business leaders to pursue the mergers and acquisitions needed to achieve their business goals before the 2024 election cycle — approvals are now more likely than in 2022 and likely in 2024.
Following this advice will help move your business forward in this new regulatory landscape.
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