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Microsoft Acquires ZeniMax Media For $7.5B

M&A | ANNOUNCEMENT DATE : 21 SEP 2020
WRITTEN BY | 22 Sep 2020
Microsoft Acquires ZeniMax Media For $7.5B
M&A

💵 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

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M&A
Bethesda Softworks
  • Established in 1986

  • Headquarters — Rockville, Maryland, United States

  • Founded by Christopher Weaver

  • Multiplatform video game publisher

ZeniMax Media
  • Established in 1999

  • Headquarters — Rockville, Maryland, United States

  • Founded by Christopher Weaver and Robert A. Altman

  • Video game holding company

Microsoft
  • Established in 1975

  • Headquarters — Redmond, Washington, United States

  • Team of 165,000+ employees

  • Founded by Bill Gates and Paul Allen

  • Latest annual report