M&A deals: when a premium pays for itself
Microsoft and Activision Blizzard, Exxon Mobil and Pioneer: two very large premiums, and what had to be true for each one to work.
Microsoft and Activision Blizzard
2023, $68.7B all-cash
Closed October 13, 2023 after global antitrust review; the UK CMA approved a restructured deal where Microsoft divested Activision's cloud-streaming rights to Ubisoft. Price was $95 a share, a ~45% premium to the last pre-announcement close. Strategic aim: own mobile via King and deepen content and IP for Xbox and Game Pass.
Exxon Mobil and Pioneer Natural Resources
2024, $59.5B all-stock
Closed May 3, 2024. Creates the largest Permian unconventional operator with ~1.4M net acres and ~16 Bboe resource. Management guides to ~$2B a year in average synergies over the next decade (two-thirds recovery uplift, one-third capex and opex).
Only pay a premium when you can turn it into hard, near-term synergies (cost, cross-sell, or capability); otherwise it is just expensive scale.
Informational content only. Not investment advice.