mardi 18 janvier 2022

Microsoft (MSFT) buys Activision Blizzard (ATVI)

We all carry great traumatisms in life. Some have been raped, some have been beaten, some have been raised by social care. And, when we grow up, traumatisms are still there. Actually, it's a life of sparse traumatisms.

When you're an adult, you think that you're safe from these traumas. You become an investor and everything is serious and rational. But no. You invest your money in Dollar Tree and that company which was great until then decides to buy Family Dollar and overpay a lot for it. Then, many years of stagnation follow and a great company becomes just a normal company.

Of course, it wasn't my worse investment. But it's the one that made me become fearful of acquisitons (I don't know why but Valeant crazy acquisitions like the feminine viagra which was way overpaid didn't traumatize me that much). 

Today, we learn that Microsoft will buy Activision Blizzard (a video game company). They should pay 95$ a share which is something like 25 times 2022 earnings. It's a bit expensive, but Activision grows by 12-13% on an annual basis with 29% margins (excellent) and a ROE of about 17. Also, their debt is low. 

It look like a good acquisiton. It may even be a great acquisiton.

I'll keep my Microsoft shares. 

1 commentaire:

  1. Acquisitions can be tricky. It all comes down to management's ability to allocate capital. That's why I try to put a lot of emphasis on the management team and their capital allocation history.

    Two Canadian companies I own (Intact Financial and Open Text), both have a good history of making timely accretive acquisitions.

    Whitecap Resources has a good history of doing this as well and of course the Brookfield family of companies are especially good at this. They usually but distressed-like assets, and improve the operations of the company, then sell them later on when they become much more valuable (they call it capital recycling).