? Acquisition
Software giant Microsoft (Nasdaq: MSFT) acquires Bethesda Softworks parent company ZeniMax Media for $7.5B, bringing the team of more than 2,300 employees on board
Apart from Bethesda, Microsoft will get access to all the other subsidiaries of the company, including id Software, ZeniMax Online Studios, Arkane, MachineGames, Tango Gameworks, Alpha Dog, and Roundhouse Studios
ZeniMax structure and leadership will not see any changes and would remain operating the company as before
The deal is expected to be finalized by the second half of the fiscal year 2021 and according to Microsoft will have a minimal impact to non-GAAP operating income in fiscal years 2021 and 2022
The announcement was made on September 21, 2020, the day before pre-orders for Microsoft’s next-gen consoles Xbox Series S and Xbox Series X became available. The consoles are expected to be released on November 10, 2020
The financial impact of the deal will be insignificant to Microsoft. Gaming revenue represents 8.1% of total group revenue
? Strategic Rationale
For Microsoft, the deal will bring the necessary Content (massive library of critically and publicly acclaimed games) to Azure-Cloud and Xbox Game Pass-Community, that has recently hit a new record, reaching over 15 million subscribers
Microsoft also plans to release ZeniMax future games on Xbox Game Pass on the same day they launch games on Xbox and PC
The current acquisition will help Microsoft to grow game development expertise increasing the number of studios from 15 to 23
Besides the $7.5B coming to shareholders, ZeniMax will also have a considerable boost in resource capabilities from Microsoft
Microsoft and ZeniMax have been working together since the release of TES: Morrowind on the original Xbox in 2002
? Previous Rounds
According to PitchBook, Providence Equity Partners is the company’s only institutional backer, and Providence is set to log a six-fold return on its $450m investment with the exit to Microsoft.
In September 2010, ZeniMax raised $150m from Providence Equity Partners and other undisclosed investors
In October 2007, ZeniMax raised $300m from Providence Equity Partners and other undisclosed investors
? Products
ZeniMax is a game publishing giant, which assets include some of the iconic gaming franchises, such as The Elder Scrolls, Fallout, DOOM, Wolfenstein, Quake, Dishonored, and The Evil Within, among many others
The company has also released a successful MMORPG title The Elder Scrolls Online with more than 15 million players and a popular mobile game Fallout Shelter, which has been downloaded more than 65 million times
? Microsoft’s M&A Activity
In 2020, Microsoft has had 7 acquisitions, though none of them were directly related to video games
In June 2019, the company had its latest gaming acquisition, buying Double Fine Productions, a studio behind Psychonauts, Grim Fandango, and Brutal Legend, among many others
In 2018, Microsoft announced several acquisitions:
In November — Obsidian Entertainment and inXile Entertainment
In June — Ninja Theory, Playground Games, Undead Labs and Compulsion Games
In January — a provider for cloud-connected gaming PlayFab
