Microsoft to buy Activision Blizzard for 69 billion $

[VideoGameAccountant]

the-pi-guy said:

VideoGameAccountant said:

I've seen this a few times in this thread, but they probably can't, or at least it would be very risky for them. 

Square's market cap (according to Google) is 689 billion yen. In just cash, Sony has 1.473 trillion yen. However, this is split between all of Sony's departments. If you take out Sony Financial Services, they only have 874 billion yen. This means Sony would either have to go into debt or spend all their cash to buy Square. Moreover, if Sony did this, you'd see Nintendo and probably Microsoft throw their hat into the ring to prevent this from happening. Nintendo has 1.07 trillion yen and has far more liquid assets (securities and CDs) than Sony does, so they could throw more money around than Sony could, if a buy out was possibility. So, no, Sony really can't buy Square.

Source: https://www.sony.com/en/SonyInfo/IR/library/presen/er/pdf/21q2_sony.pdf

Acquisitions are rarely ever made with just cash. It is often a combination of loans, stocks. The most recent Take Two acquisition included close to $8 billion of their own stocks and $4.5 billion in cash.  

Additionally, SIE would likely get a substantial chunk of that available cash. Sony pictures and Sony music usually get an oversized chunk of it, because it was deemed that those operations required more consolidation. Sony pictures CEO said that gaming would be the next likely area for consolidation.  

Yes, these deals are made with not just cash, but you still need cash. Let's use your example. Take-Two financed the deal with 36% cash. Well, 36% of Square is 248 billion yen, which would leave Sony with 626 billion yen across their other divisions. As of the 6 months ending 9/30/2021, Gaming sales was 27% of total sales revenue. Even in this scenario, they are strapping themselves for cash. Moreover, the company isn't in the best spot with chip shortages and key titles going to Microsoft. It's going to be hard to underwrite a loan for this. Also, these purchases will be more than current market cap, so it's going to harder to do. As things stand now, Nintendo (and of course) Microsoft would be better able to make the deal work. 

Lastly, that cash Square has isn't to go reimburse Sony for the purchase. The company needs that to operate. Really, Sony buying Square is more of a fanboy dream. It's not very practical.