The Competition and Markets Authority blocked Microsoft’s acquisition of Activision. Trade tracker takes a deep dive into the UK’s post-Brexit mergers and acquisitions market - a substantial increase in the market has taken place, driven by several factors and despite significant uncertainty.
On 26 April, the Competition and Markets Authority (CMA) blocked Microsoft’s $68.7bn acquisition of Activision, the video game developer responsible for the popular Call of Duty series, based on the concern that it would reinforce Microsoft’s already significant position in the cloud gaming market and undermine the growth of an emerging market.
Depending on your perspective, the decision is something to celebrate, highlighting the UK’s forward-looking consumer-focused post-Brexit regulatory stance (given the EU has approved the deal), or it is symptomatic of an unfriendly business climate, with an Activision spokesperson claiming that that ‘the UK is clearly closed for business’.
The decision highlights the CMA’s interventionist role post-Brexit, coming on top of recent examples of it stepping in to block potential market-distorting activities in the tech and digital sectors.
In 2021, the CMA presented Meta, the owner of Facebook and Instagram, with a record-breaking £50.5m fine for breaching an initial enforcement order to divest the gif creation platform Giphy, because its ownership stifles innovation in the display advertising market.
The Microsoft-Activision decision came as the government introduced the Digital Markets, Competition and Consumers Bill, which is intended to grant the CMA additional capabilities to investigate mergers and make ‘pro-competition interventions’ against companies with a significant influence in digital markets.
The greater powers for the CMA also reflect the fact that, post-Brexit, its remit has grown significantly to cover all international mergers affecting the UK. This makes it one of the most consequential competition authorities internationally, and led to fears that it may struggle with a dramatically increased caseload (though in reality it only reviews a small fraction of mergers).
There were also fears that Brexit-related uncertainty would dampen the UK’s mergers and acquisitions (M&A) market, yet the data produced by the ONS tells a rather different story. Driven by several factors, including the relative undervaluing of UK plc and the pound’s weakness, there has been a substantial boom in the UK’s M&A market.
Looking first at M&A volume, there has undoubtedly been an increase following the 2016 referendum. This reached a peak in 2021, with a total of 2,298 deals (310% higher than in 2015). Most of the activity was driven by the 1,198 domestic deals (M&A between two UK companies), accounting for 52% of the overall activity.
Another key factor was the rise in inward M&A, referring to deals in which foreign companies acquire UK businesses, which in 2021 was the highest since records began in 1987.
From 2015 to 2022, inward M&A grew by 397%, which is significantly more than the 108% growth in outward M&A (UK businesses buying foreign companies)...
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