Microsoft-Activision deal could open 'the floodgates' for more tech M&A

Microsoft (MSFT) this week cleared a massive hurdle in court in its efforts to acquire Activision Blizzard (ATVI) for a whopping $69 billion. If the deal gets done as anticipated, it could mean much more tech M&A, Jefferies senior analyst Brent Thill recently told Yahoo Finance Live (video above).

"We think it opens the floodgates for more M&A," Thill said. "There's no question that anyone who was looking at doing M&A was looking at Microsoft's transaction with Activision. They were looking at Broadcom-VMware, they were looking at Adobe-Figma, all these deals in a holding pattern. If we can get these deals closed, we think, ultimately, it's going to open up confidence to make the move forward."

The good news, he added, is that the deal, and the court win, might mean that "ultimately if it's good for the consumer, the government can't just block everything."

Tech M&A has stalled amid a difficult macroeconomic climate and heightened regulatory scrutiny, led in the US by Federal Trade Commission (FTC) chair Lina Khan. Though Microsoft's bid for "Call of Duty" maker Activision Blizzard was recently cleared by a judge, regulatory hurdles are still very much in place when it comes to Adobe's (ADBE) proposed $20 billion buyout of Figma. Meanwhile, Broadcom's (AVGO) $61 billion VMware (VMW) deal has been inching closer to completion, this month getting the OK from European regulators (though it is still under investigation by the FTC).

"M&A is a good cleansing process," said Thill. "We've gone through a huge cycle, where a lot of companies have gone public and a lot of companies that are operating would just be stronger together. So, I think this is a cleansing process we need to go through, and it helps to restore confidence back into tech, as well as for a lot of other names."

Deal-making possibilities remain across the tech space, said Thill.

"You look at infrastructure software, you look at cybersecurity," he said. "I think the new big one that we're starting to see is in AI. There are a lot of AI startups, and they'll never get scale on their own. They need big balance sheets, users, and data to get the scale."

But, he added, "there are multiple areas of the tech stack that will get consolidated, and many of these areas will benefit from M&A returning."

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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