At a sale price of $7.5B, last week’s purchase of Zenimax Media by Microsoft marks the single largest acquisition of a video game company in the history of the medium. That record won’t hold for long. This deal will simply be the first, but not the last, major M&A we are going to see as Microsoft and Sony (and possibly even Nintendo, Google and Amazon) leverage their war chests to position for a subscription gaming future.
So which major gaming company will be picked up next? The bigger publishers - Activision/Blizzard (worth $60B), Electronic Arts ($37B), and Take Two Interactive ($18B) - are all too expensive at their current valuations. The next tier of companies, however, is ripe with potential targets. Capcom, Ubisoft, and Square Enix are all valued in the $5-10B range. Of these, Capcom stands out as a compelling option for Sony – whose Film/TV divisions could also tap into IP with a track record of upstream success (the Resident Evil franchise is one of the highest grossing horror franchises of all time).
That said, my pick here is Bioware. Bioware, the developer behind Mass Effect, Knights of the Old Republic, and the original Baldur’s Gate series, is currently owned by Electronic Arts. However, after a lukewarm launch of the sci-fi RPG Anthem last year, rumors circulated that EA was considering shutting down the studio. Now that Microsoft owns Bethesda (known for its own highly successful Fallout and Elder Scrolls RPG series), there is an opportunity to corner the market for a genre that is incredibly popular with western gamers. EA CEO Andrew Wilson has stated publicly that he’d bet on BioWare “every day and twice on Sunday,” but if Microsoft comes to the table with a lucrative deal, I’m willing to bet that EA would take the money and run.