 Okay, welcome to the channel and the conversation that we're going to have about Microsoft and the M&A deal announced yesterday where they're going to spend $69 billion of a cash-funded takeover of Activision Blizzard. MSFT shares were down about two and a half percent yesterday. The NASDAQ actually was quite an under performer down around the same margin against the other US indices. Activision was up around 26 percent. But I was in the supermarket last night and even the guy on the checkout was trying to talk to me about this deal, which I think says a lot and really is the reason why I want to do this video. And there's no one else better in the Amphi team to get on this call than Eddie Donmez. So Eddie, how's it going and initial thoughts on the news? Yeah, it's all going well. I'm excited to see the news yesterday. It's definitely a huge deal. I think why it's caught so much attention is because it's got a huge amount of users and it appeals to the consumer because a lot of us are gamers. So yeah, Microsoft buying Activision for $69 billion. It's the biggest tech deal ever. It's actually just eclipsed Dell EMC, which was $67 billion. Representing a 45 percent premium to Activision's Friday clothes. The offer basically equates to about 18 times EBITDA, Activision's EBITDA. And this is pretty much in line with comps. So there was a recent acquisition of Take Two. They make Grand Fet Auto, which was about 16 times EBITDA as well. So it's kind of in line with comps, but it's such an exciting deal because it really represents, I think, the next kind of secular wave of deal making. And this is all really centered around gaming, eSports, the metaverse, of course, which is, I guess, slightly further along, I would say. But this is definitely a great consumer facing acquisition for Microsoft and Xbox. And of course, Microsoft is a cloud beast. And this kind of flows into that kind of rhetoric. I know in mainstream, I think people have got way too excited about meta. And I actually, I remember doing a podcast with Piers, I had a trading a few months ago, and we were talking about Microsoft. And, you know, there's such a beast silently going along in the cloud space, in their professional services that they offer. I mean, the main one might not have the talent, but they've got the firepower to purchase and then facilitate that kind of infrastructure. And yeah, I think Facebook credits Zuckerberg for putting it in the public consciousness. But yeah, I think Microsoft can, like you said, the metaverse is later. There's steps to that process. And I guess this is a really intelligent move in that direction. Yeah. So, you know, what's really drove this deal is Activision Blizzard is, you know, it's big. It's a really big company. They have 400 million monthly active users. The best fact ever that I have researched and found Candy Crush. Remember that game? Is it still has people still play that? People still play it and it's the highest grossing mobile game outside of China. They have 273 million monthly active users. So huge game. So I think, again, this is really all about gaming and I think particularly mobile gaming and this new transition to cloud gaming, which is really following the almost the Netflix subscription route. So, you know, I'm a gamer. I used to game a lot more. I don't really have much time anymore. But Call of Duty, which is one of the biggest titles that Activision Blizzard hold. And this is what it's all about. It's all about IPs and titles and these kind of game franchises, which are just massive. And this really kind of sets up the scene between this gaming fight between Facebook, between Apple. So Apple have got Apple Arcade, which they've got, you know, a few titles. What, you know, some of the iPlayer MBA is fantastic. The graphics incredible, especially with the new M1 processors, particularly in the iPad and the MacBook. So that's really good, but it's not got the big titles just yet. It's really kind of in its infancy. So I'd be looking at Apple, maybe looking at an EA sports, for example, in terms of what deals to come. But what this does is there's an app called Mobile Pass that has 25 million subscribers, particularly on you can download it on Apple and things like that. And what this does is essentially brings all of those titles onto that mobile gaming platform. So it's like Fallout, Halo, Call of Duty, and it really represents an exciting kind of move by Microsoft. And this kind of gaming and advertising space could represent an incremental $1 trillion share gain for Microsoft longer term. So this kind of global gaming market generated $180 billion in revenues in 2021, and that's expected to grow to $218 billion just by 2024. Right. So this is the next kind of move in a big addressable market. Yeah. And you mentioned there before about is this going to be a wave of consolidation in this space now as they all compete to kind of try to eat up all of the existing ones. So I saw Sony shares were down, obviously a big competitor of the PlayStation over down 10% or more than that actually overnight in Japan at 20 billion off their market cap right there on the back of the news shares in Square Enix and Capcom. They are about 5% in overnight Asia pack trade as well. So are we going to see a bit of a broader land grab in the space now as they go after these names. Absolutely. I think this is definitely the next kind of as I mentioned secular deal trend where the big kind of firms are going to start or even mid cap are going to start purchasing up these kind of franchises and these game providers all to consolidate. So you'd be looking at Apple, for example, I would say like an EA would be super attractive to them and a metaverse looking at potential targets and that's why you saw the kind of comps for similar companies to Activision Blizzard really get a nice kind of move up yesterday. So I think that is going to be the next kind of driver of deal flow but also cyber security then as you're kind of moving people more and more users into gaming and things like that. Then you've got, you know, a potential real attractive opportunity for lots of kind of smaller to midsize cyber security names as well. I mean, you mentioned at the start that Microsoft were offering a 45% premium. I was looking at the five year average for that space of video game producers other entertainment software and it normally over the five year average around 24%. But Microsoft are getting a fairly good price right if we look back at the last 12 months. So yeah, you in the general tech space you generally see some anywhere from a kind of 20 to 30% premium that's kind of standard, but there's been blood in the streets, if you like. So there's been a huge amount of kind of culture problems, let's say, well to put it lightly Activision I think that is putting it to likely sexual misconduct and lots of kind of scandals rumbling on and this is one, I guess, big concern in terms of the integration of the two cultures like the Xbox culture and the Activision Blizzard culture moving together, but the shares were down since that kind of scandal emerged down about 30%. So yes, the 45% premium seemed pretty hefty but actually you're getting a very good kind of you're buying when there's blood in the streets but then there is the potential concerns in terms of the culture. And there's going to be a lot of work to be done there. And what I was reading was that the in terms of the deal timeline Microsoft expect it deal to close in fiscal year 2023. In terms of the CEO Activision so Bobby Kotick who's just been the person in a lot of focus recently he's going to stay there until the deal fully closes is what they're talking about at the moment. But just given what you're saying then, if we do get this wave of consolidation surely at some point, and just given the general size of the deal. This is going to get regulators sniffing around thinking right. Was it am I right in saying this is going to be like the third largest gaming. Like, yeah, so in the market now. Microsoft will become the third largest game gaming kind of platform by revenue so you're absolutely right it's a huge deal like let's not underestimate this is 69 billion this is a massive deal. However, Microsoft have paid actually well they've agreed to pay a three billion break free. So of the deal so if it falls through they have to pay Activision Blizzard three billion. So they basically suggesting that they're very confident in this passing. But I guess if you're a listener you'll be thinking what big big cap tech doing M&A like that's a no go right and to draw anti trust. You know that's actually talking about breaking these kind of big kind of giant so M&A was kind of off the table. But you know Microsoft seem very confident in this kind of deal getting done. So I am from the root kind of whispers that I've heard of actually that everyone's very confident in this deal passing. So yeah, looks looks like this is going to be a great acquisition and probably from the premier CEO in the Della. So and that looks like it's going to be another really really good move and it's you know, yes it's 69 billion. It's only 3% of Microsoft enterprise value. So it's tiny they've got tons of cash they're looking they're looking for something to do with it and this represents a really nice consumer facing acquisition I would say. Okay, good conclusion then we'll leave it there. Thanks very much Eddie. Thank you.