The deal that closed while the FTC was still suing: how Microsoft bought Activision Blizzard for $68.7 billion
How Microsoft got its $68.7 billion purchase of Activision Blizzard past three regulators: the price it paid for extra time, the rights it had to give away, and the US lawsuit that outlived the deal.
On 13 October 2023 Microsoft completed its $68.7 billion purchase of Activision Blizzard, the publisher of Call of Duty, World of Warcraft and Candy Crush. 1 By then the US Federal Trade Commission had been suing to block the deal for ten months. 2 The UK Competition and Markets Authority had prohibited it outright in April. An order barring Microsoft from taking any interest in Activision without the agency's consent had been in force since August. 34
The deal closed at the price agreed twenty-one months earlier, $95.00 a share in cash. 5 What changed was the shape of what Microsoft was allowed to own. The cloud streaming rights to Activision's games outside Europe went to a rival publisher, Ubisoft, immediately before completion. 6
For a manager whose deal needs an approval they do not control, this case sets out three levers, each with a price on it. One authority settled for promises. One could only be satisfied by changing what was being bought. The third went to court, lost the argument, and kept its case alive for nineteen months after the closing.
Deal snapshot
| Parameter | Terms |
|---|---|
| Parties | Microsoft Corporation (buyer), Activision Blizzard, Inc. (target) and Anchorage Merger Sub Inc., a wholly owned Microsoft subsidiary. 5 |
| Announced | 18 January 2022. $95.00 per share in cash, an equity value of $68.7 billion inclusive of Activision's net cash, and a premium of about 45.3% to Activision's close on 14 January 2022. 7 |
| Advisers | Goldman Sachs and Simpson Thacher for Microsoft; Allen & Company and Skadden for Activision. 5 |
| Termination fee payable by Activision | $2,270,100,000, equal to 3.75% of the transaction's equity value, payable on a change of recommendation or a superior proposal. 7 |
| Reverse termination fee payable by Microsoft on antitrust failure | $2.0 billion if notice came within 12 months of signing, $2.5 billion in months 13 to 15, $3.0 billion after month 15. 7 |
| Original outside date | 12 months from signing, with two automatic three-month extensions where regulatory approval was the only condition outstanding. 7 |
| Extension bought on 18 July 2023 | Termination rights frozen to 18 October 2023; the reverse fee raised to $3.5 billion after 29 August and $4.5 billion after 15 September; closing conditions waived in every jurisdiction except the UK and the US. 8 |
| European Commission | Cleared on 15 May 2023 on ten-year commitments to license Activision games to consumers and to rival streaming providers. 9 |
| Competition and Markets Authority | Prohibited the deal on 26 April 2023, then cleared a restructured transaction on 13 October 2023 in which Ubisoft buys the non-EEA cloud streaming rights. 36 |
| Federal Trade Commission | Administrative complaint in December 2022; request for a preliminary injunction denied on 10 July 2023; merger completed on 13 October 2023 with the case pending; complaint dismissed on 22 May 2025. 1011 |
The price took a month to settle; the contract was built for a fight
The talks ran from an approach on 19 November 2021 to a signed agreement on 18 January 2022, and the price moved twice. Phil Spencer, who ran Microsoft's gaming business, raised the idea with Activision's chief executive Bobby Kotick, and Satya Nadella followed up the next day. 7 On 26 November Microsoft floated $80.00 a share. Kotick replied two days later that his board might engage at a range of $90.00 to $105.00 a share. Microsoft accepted the range on 29 November, adding that it would be more comfortable at the bottom. 7
Two weeks later Kotick told Microsoft he was not authorised to go below $95.00, and that any deal would also need agreement on a reverse termination fee. Microsoft moved to $95.00. Activision's board granted thirty days of exclusivity on 20 December, and the term sheet signed that night already fixed the amount and the trigger for the reverse fee. 7
Two details of the purchase agreement decided more than the price did. The first is Microsoft's promise to use reasonable best efforts to obtain clearance and to offer and accept divestitures. The promise came with a limit: Microsoft could refuse a remedy that would materially hurt Activision, materially reduce the benefit it expected, or more than immaterially affect one of its own business lines. 7 The second is the fee ladder: the longer the review ran, the more Microsoft owed Activision if antitrust blocked the deal. 7
Read together, those two clauses are a pre-paid option on time. Activision's board agreed to sell into a review it expected to last more than a year, and Microsoft agreed to pay more the longer its counterparty waited. The price of failing was itemised before anyone knew which regulator would object.
Decision point 1: three regulators, and only one of them negotiates
Date: February 2022 to April 2023.
Decision: Microsoft took its concessions to the parties who would be harmed, before taking them to a court. On 21 February 2023 it signed ten-year commitments to keep Call of Duty on Nintendo consoles and on Nvidia's GeForce Now streaming service. A comparable ten-year deal with the cloud platform Boosteroid followed on 14 March. 1213 The announcement was made at a Microsoft press conference in Brussels, where Nvidia said the partnership resolved its concerns and that it supported approval. 12 Further deals followed with Ubitus and with Spain's Nware. 14
Viable alternative: Settle with the agency that had jurisdiction over the home market. A consent order with behavioural conditions, of the kind the Commission was already shaping, would have let Microsoft buy Activision without separating anything.
Constraint and power asymmetry: The three authorities held different instruments, and only one of them trades. The European Commission can accept commitments instead of prohibiting a merger, and it tested three successive packages from Microsoft before accepting the final one on 20 April 2023. 9 The CMA had already said in its provisional findings that behaviour promises of the very kind Microsoft was offering were not a remedy it would take. 3 The FTC is not a party that settles in the ordinary sense. It voted to sue, and it can run two tracks at once: an administrative case in its own forum, and an injunction action in federal court. 10
Negotiated term: Licensing rather than separation. Microsoft also removed a different kind of opposition. On 13 June 2022 it signed a labour neutrality agreement with the Communications Workers of America, covering Activision employees after closing. The union's president said the agreement addressed its concerns and that it supported approval. 15
Consequence: The Commission cleared the deal on 15 May 2023 on the strength of the licences, and they run for ten years from closing, to 13 October 2033. 19 In the UK the same concessions bought nothing. Microsoft later argued that the Commission's decision and the streaming licences were a material change of circumstances that required the CMA to think again. The agency rejected every argument and kept its prohibition. 14
Decision point 2: the UK says no, and time becomes the scarcest asset
Date: 26 April 2023 to 18 July 2023.
Decision: Microsoft chose to keep the deal alive and buy more time, at a rising price. Its outside date was 18 July 2023, and it was defending an injunction trial in California in the same month. 10
Viable alternative: Walk away. The ladder in the original agreement made that a calculable decision rather than a catastrophe: terminating in July 2023 on antitrust grounds would have cost Microsoft $3.0 billion. 7
Constraint and power asymmetry: The CMA's prohibition came with a final order, imposed on 22 August 2023, that barred Microsoft from acquiring an interest in Activision without the agency's prior written consent. 4 Activision, meanwhile, held an asset Microsoft wanted and a contractual right to be paid for waiting. That gave the target the stronger hand in July 2023, and it used it.
Negotiated term: The letter agreement of 18 July 2023 froze both sides' termination rights until 18 October 2023. It also raised the fee for walking: $3.5 billion if notice came after 29 August, and $4.5 billion after 15 September. Activision waived its right to collect during the freeze. It separately won a regular dividend of up to $0.99 a share, and commercial arrangements worth up to $500 million if the deal died. 8
Consequence: Three extra months, and a much larger bill for failure. The same letter waived the closing conditions tied to regulatory clearance and to prohibitions or injunctions everywhere except the United Kingdom and the United States. That carve-out is what made a closing without the CMA's consent possible to contemplate. 8
Decision point 3: win the one hearing that can stop you now
Date: June 2023 to October 2023.
Decision: Microsoft fought the American injunction instead of reaching a settlement, then closed while the case continued. The FTC filed in federal court in June 2023 and won a temporary restraining order; the merger's 18 July termination date gave the court four weeks to hear the whole thing. 210
Viable alternative: Offer the FTC remedies to end the case, or postpone completion until the administrative trial finished. Either would have deferred the value of the acquisition indefinitely with no clear end date.
Constraint and power asymmetry: On paper the FTC held the easier burden. It had to show only a likelihood of success on its claim that the merged company would foreclose Call of Duty from rivals. The court held a five-day evidentiary hearing on exactly that theory. 10 Microsoft's advantage was evidence of its own conduct: the ten-year licences to Nvidia and the others, internal communications, and the economics of a game whose value depends on cross-platform play. 2
Negotiated term: This step was decided by a judge rather than settled between the parties. On 10 July 2023 the court found the FTC had not shown it was likely to succeed, and denied the injunction. 10 The Ninth Circuit denied the FTC's emergency request for an injunction pending appeal the next day. On 16 July Microsoft signed a ten-year deal with Sony, its loudest opponent, to keep Call of Duty on PlayStation. 2
Consequence: Within twenty-four hours, the last instrument that could have stopped the merger before completion was gone. The FTC withdrew its administrative case from its own tribunal on 20 July and returned it on 26 September. 2 Microsoft completed the acquisition on 13 October 2023, with the appeal pending and the administrative case open. 16
Decision point 4: change the transaction, not the argument
Date: 31 July 2023 to 13 October 2023.
Decision: Rather than wait for a tribunal to review the April prohibition, Microsoft rebuilt the deal so that the CMA's objection attached to something Microsoft would no longer buy. On 22 August 2023 it notified the agency of an acquisition of Activision excluding the company's cloud streaming rights outside the European Economic Area. 6
Viable alternative: Press the appeal and the reconsideration request. Microsoft had already tried that route. On 25 July it submitted that the Commission's decision, the new streaming deals, US litigation evidence and material from its own UK proceedings justified a different outcome. The CMA answered on 25 August that none of it changed its remedy decision. 14
Constraint and power asymmetry: The CMA had the last word on its own decision, and its remedy of choice was prohibition, which left nothing to negotiate inside the existing review. 3 The only move left was to make the transaction a different transaction and submit it for a fresh review.
Negotiated term: A divestiture to a competitor. Ubisoft agreed to buy the worldwide cloud streaming rights, excluding the EEA, for all current Activision games and all titles released in the fifteen years after closing. Ubisoft pays a one-off sum plus wholesale pricing, can license the rights on to others, and can require Microsoft to adapt games to non-Windows systems. The divestiture happens immediately before completion. 617 Microsoft also gave undertakings that made the sale enforceable by the CMA, which was the condition the agency attached to its consent. 18
Consequence: The CMA granted consent and accepted undertakings in lieu of a full review on 13 October 2023, and the deal closed the same day. 16
What it bought, what it cost, and how it ended
The buyer kept everything it set out to buy. Microsoft owns Activision's studios and franchises, the rights that let it put those games on Game Pass, and, outside cloud streaming, the ability to decide where they appear. 5 The price per share never moved. 7
The concessions were permanent and they outlast most of the people who negotiated them. Rival streaming providers hold royalty-free licences to Activision's games for ten years, to October 2033. 9 Ubisoft holds the cloud streaming rights outside Europe for fifteen years. 17
The American case ended with nothing attached to the deal at all. The Ninth Circuit affirmed the denial of the injunction on 7 May 2025. It held that the FTC had not shown the merger would substantially lessen competition in consoles, subscription libraries or cloud streaming. 16 The Commission then dismissed its complaint on 22 May 2025, nineteen months after the closing it had tried to stop. 11
The strategy drew a public rebuke from the authority it eventually satisfied. The CMA's chief executive, Sarah Cardell, said on the day of clearance that Microsoft had been offered a restructure during the initial investigation. It had insisted instead on a package the agency had told it would not work. "Dragging out proceedings in this way only wastes time and money," she said. 18
Microsoft reached the outcome it wanted, a year after refusing the concession that ended up closing the deal.
Five reusable frameworks
1. Price the time separately from the price
A long regulatory review is a cost, and the purchase agreement is where you decide who pays it. Activision took the full $95.00 a share and charged separately for the risk of a long review. Its break fee climbed from $2.0 billion to $3.0 billion, and then to $4.5 billion once the seller held the leverage. 78
Use it when: Approval will probably take longer than your outside date.
Diagnostic question: If clearance slips six months, who bears the cost, and does the other side still have a reason to keep the deal alive?
Operating boundary: A rising fee is a real liability. Microsoft was buying an option, and an option that expires worthless still gets paid for.
2. Sort your approvers by what each one can do alone
The three reviews produced three different kinds of power. The Commission can accept commitments, so it can trade. The CMA prohibits, and its remedy was not negotiable inside the existing review. The FTC must persuade a court to stop a closing and cannot stop one by itself. 3910
Use it when: More than one authority has to clear the same transaction.
Diagnostic question: For each one, what can it do to me on its own authority today, and what does it need someone else to do?
Operating boundary: The agency with the weakest immediate power can still be the one that lasts longest. The FTC's case survived the closing by nineteen months.
3. Buy consent from the parties who are not at the table
Microsoft's concessions went to companies that could not block anything themselves, and they bought real support. Nvidia, Boosteroid, Ubitus and Nware each received ten-year licences and, in Nvidia's case, publicly supported approval. The union agreement removed labour opposition in Washington. 1215
Use it when: The stated theory of harm is about what you would do to third parties.
Diagnostic question: Whose support would remove a theory the regulator has written down, and what does that support cost compared with restructuring?
Operating boundary: Concessions that do not answer the decision earn nothing. The CMA reviewed the same licences and kept its prohibition, because they were behavioural and it did not trust them to hold in a market still forming. 14
4. Separate "can they stop me now" from "will they win later"
Microsoft's American strategy turned on that distinction. Once the district court denied the injunction and the Ninth Circuit refused to revive it while the appeal ran, no one held an instrument that could prevent completion. 210 Microsoft closed with the case still open.
Use it when: A challenge is pending and your outside date is close.
Diagnostic question: Does the other side hold a live injunction, or a claim that only produces a remedy at some later hearing?
Operating boundary: Closing into an open case leaves the remedy undecided for years, and a regulator that wins later can still order a divestiture of a business you already own. Microsoft could carry that risk because it had already sold the UK its cloud rights and capped its European behaviour for a decade.
5. When the objection is structural, change the deal
The argument route failed and the design route worked. The CMA rejected Microsoft's contention that outside events required it to reconsider, then cleared a transaction in which Ubisoft owned the streaming rights and the objection had nowhere left to attach. 614
Use it when: The approver's decision is a prohibition that cannot be reopened on argument.
Diagnostic question: What single change makes this a different transaction, and can I make it before completion rather than after?
Operating boundary: The new shape is permanent and it leaves your group. Whatever you sell to close becomes a competitor's asset, so the price has to be worth the deal.
The manager's takeaway
Before signing anything that needs approval, put four things on one page. Every authority whose consent is required. What each can do without anyone else's help. Which closing conditions you would waive if the clock ran out. What you will pay your counterparty for more time. Microsoft answered all four, in the contract, before it knew which regulator would object. That page is the reason a deal that two authorities tried to stop closed at the price first offered.
References
- 1
- 2FTC v. Microsoft Corp., 137 Harv. L. Rev. 1010
harvardlawreview.org
- 3
- 4
- 5
- 6
- 7
- 8Activision Blizzard Form 8-K and merger letter agreement, July 2023
investor.activision.com
- 9
- 10FTC v. Microsoft Corp., preliminary injunction opinion
storage.courtlistener.com
- 11
- 12Microsoft and NVIDIA announce expansive new gaming deal
news.microsoft.com
- 13Microsoft announces partnership with Boosteroid
boosteroid.com
- 14Final decision on possible material change of circumstances or special reason
assets.publishing.service.gov.uk
- 15CWA, Microsoft announce labor neutrality agreement
news.microsoft.com
- 16FTC v. Microsoft Corp., No. 23-15992 (9th Cir., 7 May 2025)
cdn.ca9.uscourts.gov
- 17Activision Blizzard games coming to Ubisoft+
news.ubisoft.com
- 18
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