Should Sony acquire another less expensive developer? Since Square is really in good terms with Sony?

[VideoGameAccountant]

mjk45 said:

VideoGameAccountant said:

I've said this in another thread, so I'll summarize it here. Sony can't buy Square. They don't have the liquidity to do it
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. Even if they do a half cash, half stock deal, then it's still costing them 345 billion yen, and would only leave all of Sony's divisions (sans Financial Services) with 529 billion yen. One thing to keep in mind is Sony does not have a lot of liquidity, so to lose this much cash puts them at a pretty big risk. Also, Sony has a lot of short term debt (1.478 trillion which is more than the cash they have on hand) and a decent amount of long term debt. They don't have the money to throw around.

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. Not to mention they have less debt. They also have a lot to lose if Sony bought Square, since Nintendo pushes for Dragon Quest, has smaller developers that make third party content for them (Octopath/Braverly Default) and legacy content (and Smash I guess). So even if Sony could do it, they'd likely get outbid in the end.

By the by, there is a reason why you haven't seen Sony make a lot of big acquisitions, or many acquisitions to begin with.

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

There are a few things money is at historically low levels,Sony's CFO stated in a financial statement after the Zenimax takeover that they had the means to make large scale acquisitions beyond the cash they had already set aside toward any future purchases,  11 billion US in cash and another 16 billion in liquid assets  giving them 27 billion liquidity without needing to touch their lines of credit, he also mentioned that their liquidity was growing at record levels (I read somewhere iirc around 400%) and he also stated the reason he made the statement was to clear the air regarding speculation that Sony didn't have the means to make these size acquisitions and if they did it would come with excessive debt levels or impact their cash flow, he again further emphasised that he was about clearing  up those misconceptions and this didn't mean they were making any such acquisitions and also importantly it also didn't mean if they did they would be done  just by using up their cash/ liquidity reserves in one hit.

Another aside when it comes to their capacity to obtain credit and it may not have anything to do with this is I recall sony making news for buying out and reincorporated their banking service.

Let's look at Sony's current assets.

• Investments and advances in the Financial Services segment - These are assets needed for the Financial Service sector, and they can be used for acquisitions. Any financial business is about managing liquidity and earnings, so these can't be liquidated. 
• Trade and other receivables, and contract assets - These are likely split off between multiple divisions in Sony. They likely wont be able to pledge these for an acquisition, nor would they want to. 
• Inventory - Don't think I need to explain this
• Other financial assets - This is probably the only thing that could be considered liquid. Only problem is its only 106 billion yen (2% of current assets) and could be things Sony can liquidate easily. 
• Other current assets - These are likely things like Prepaids.

As you mentioned, his comments are to make it seem they can totally make acquisitions if they wanted to. They had to say something to assure investors everything will be OK. And I'm sure, in someway, they can get to that number, but noticed that, in the time since Microsoft bought Zenimax they haven't made any kind of acquisition like that? At most, they've bought one or two smaller developers that have worked closely with Sony. But they haven't made any kind of purchase like Microsoft.

On debt, Sony has a lot of debt already which makes it difficult for them to do big purchases if they wanted to. This wont stop them from making smaller acquisitions, but something like Square would be a different story.