Modern companies understand the importance of rethinking business processes and transforming them to maintain market leadership. In this article, we will analyze the Microsoft mergers and acquisitions processes to keep its market position.
Microsoft in M&A global market
Under the pressure of growing global competition, the vulnerability of global economic development to the drivers that determine the frequency and depth of crises, there has recently been an increase in the number of mergers and acquisitions (M&A) worldwide. The need to form a progressive competitive strategy of the organization through the expansion of market share is often the driving force of the decision on such deals in international business. In addition, M&As enable organizations to penetrate new geographic markets, promote growth through capitalization in various fields and synergies of economies of scale. Thus, Microsoft company chose M&A deals as a priority area to strengthen its position on the global market.
Today there is a trend for agreements in the field of IT Google, Yahoo! and Microsoft have chosen a strategy to acquire promising startups to acquire new unique technologies and direct hire employees of companies that have been acquired. Widespread in mobile gadgets, and thanks to this, have become face recognition and voice control technologies, which were originally only small businesses built to sell certain technology.
Currently, there is a trend in the IT environment to create a small innovative business (startups) and sell it quickly to Internet giants, which generates statistics on small acquisitions. For example, the Microsoft holding company with a capitalization as of the end of August 2019 has acquired 230 companies.
Microsoft culture change in M&A deals
The list of the largest Microsoft M&A deals contains the following transactions:
- In January 2018, Microsoft announced the acquisition of PlayFab, a backend service provider for creating and launching cloud-based games. More than 3 thousand studios use the company’s services, it can be found in more than 1.2 thousand active games with a coverage of about 700 million people. Notable clients: Disney, Rovio, and Atari. Notable projects: Idle Miner Tycoon, Angry Birds Seasons, and Roller Coaster Tycoon Touch. In the same year, Microsoft bought GitHub for $7.5 billion, the largest service for hosting software source codes and collaborative development.
- In 2022, Microsoft unexpectedly announced the purchase of the gaming holding Activision Blizzard. The deal is valued at $68.7 billion, which is 2.5 times the previous record purchase of Microsoft ($26 billion for LinkedIn in 2016). The agreement will be the largest merger in the history of the gaming industry.
- In 2013, the Microsoft team decided to take over the popular Finnish mobile phone company Nokia, which later turned out to be one of the biggest failures in the company’s history. As part of the acquisition, around 32,000 former Nokia employees will move to Microsoft, 4,700 of them in Finland and 18,300 at the various production sites around the world. The essence of the purchase was to improve and promote its own brand of budget smartphones Windows Phone. But, unfortunately, even after the forcible transfer of Nokia devices to the Windows operating system – in their price segment, these smartphones were uncompetitive in the market.
Besides, Microsoft regularly buys global communications and IT companies for tens of billions of dollars. But not all of these purchases are profitable. Microsoft’s M&A record is marked by growing desperation. The software giant paid $1.2 billion for the loss-making Fast Search & Transfer. That’s a premium of 42 percent.