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Market Pulse
Monday, July 17, 2023

Dealmaking in a new age of antitrust

Following the positive feedback we received on last week's sports focused Market Pulse, we've decided to once again stick with a single theme... this time, deal making and the new age of anti-trust.

So our three stories this week are:

  1. Microsoft buying Activision: a $3bn ticking clock.
  2. Intel buying Tower Semiconductor: casualty of (chip) war?
  3. Adobe buying Figma: a killer deal?

Read the full Market Pulse below, or if you want to access it on the go, download the Sidekick app.

Cyril (CIO), and the rest of the Sidekick team.

It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.

Dealmaking in a new age of antitrust

The goal of anti-competition regulation is to prevent monopolies and promote fair competition in business. Antitrust is currently experiencing a disruptive revival.

The advent of tech giants that act as gatekeepers to the digital economy and the inception of the 'trillion dollar club' - a group of companies with market valuations surpassing a trillion dollars, has spurred antitrust regulators to scrutinise large scale M&A with greater intensity across the globe.

The impact of juiced up antitrust enforcement is already clearly visible. Let's take a quick look at 3 global deals that have made recent headlines. 

1) Microsoft buying Activision: $3bn clock is ticking. 

Microsoft has been trying to acquire Activision since January 2022. While the deal has been approved in the EU, it was until recently still being blocked in both the UK and in the US. Last week, a US court denied a FTC (Federal Trade Commission) bid to block the deal and now only the UK regulator stands in the way.[1].

The CMA (Competition Market Authority) in the UK has taken an unusual step of re-opening their investigation. They are giving Microsoft another chance to change the structure of the deal to address their concerns[2]. One sticking point was cloud-gaming and Microsoft could offer to sell UK cloud-gaming rights to a third party.[3] Microsoft is very keen to get the deal done before the deal deadline later this week, after which they might have to pay Activision a $3bn deal breakup fee[4]

2) Intel buying Tower Semiconductor: casualty of war?

Not all deals are being blocked due to competitive concerns. Intel is trying to acquire Tower Semiconductor, an Israeli chip maker, but the deal is being blocked by the Chinese regulator. Given the deal got the green light elsewhere, some market participants have speculated this deal is being blocked because of the ongoing US and China chip war and has less to do with antitrust concerns[5]

Tower Semiconductor is a part of Intel's plans to become the #2 global semiconductor foundry after TSMC but time is running out and it seems like Intel might have to make another plan. Intel offered $53 per share, all cash, for Tower Semiconductor and the current share price, well below $40, indicates the market is giving it a low chance of being approved. 

3) Adobe buying Figma: a killer deal?

Figma offers cloud-based design tools that compete with Adobe software like Photoshop. Adobe is trying to acquire Figma for $20bn, more than double the valuation at Figma’s previous funding round. The deal is expected to face lengthy antitrust investigations in the EU, UK and the US. The EU regulator said they will investigate the deal despite EU revenues being well below levels that will typically require an antitrust investigation[6]

This deal is different to the previous two as regulators are concerned it might be a ‘killer deal’. This is when a larger rival buys a small innovator to eliminate what they consider to be a severe competitive threat. Adobe is arguing that Figma is a compliment to their product line-up and not a direct competitor as only 10% of Photoshop users also use Figma. 

A lot of recent antitrust cases seem to have a common theme: Big Tech is getting too big and needs to be reigned in. Antitrust lawsuits often claim these companies are gobbling up smaller competitors, raising barriers to entry for competitors and taking away the power of choice from consumers. These forces usually combine to drive higher profitability for companies. If regulators are ultimately successful in reigning in Big Tech it might mean less profits for them in the future. 


[1] https://www.ft.com/content/e94b9d46-ae94-4563-b09c-0032a9e7530d 

[2] https://www.ft.com/content/613c6f84-2b04-43ea-8208-219f1a914632 

[3] https://www.bloomberg.com/news/articles/2023-07-13/microsoft-activision-weigh-sale-of-some-uk-cloud-gaming-rights 

[4] https://news.bloomberglaw.com/antitrust/ftc-loses-appeals-court-bid-to-pause-microsoft-activision-deal 

[5] https://www.reuters.com/article/china-regulator-deals-idAFL4N3672TN 

[6] https://www.ft.com/content/d041351e-0974-4a27-ada2-7c026f67e765


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