ZS - Microsoft Broadcom deals shows mega cap M&A 'is back' Jefferies says

2023-07-12 11:01:12 ET

After a U.S. federal court rejected the Federal Trade Commission's request to block Microsoft's ( NASDAQ: MSFT ) deal to acquire Activision Blizzard ( ATVI ) and the EU granted conditional approval to Broadcom ( NASDAQ: AVGO ) to buy VMware ( VMW ), investment firm Jefferies said large-scale deals are "back," with the focus going to small and mid-cap names.

Analyst Brent Thill said the implications for Microsoft ( MSFT ) are that the largest acquisition to date, for which Microsoft ( MSFT ) will pay $69B for the Call of Duty maker, will allow it to have more "ratable revenue" and boost its user base, as Activision has 370M monthly active users to further push its subscription revenue.

"This cross platform IP should help drive Xbox's Cloud gaming initiatives and benefit Azure usage," Thill wrote in an investor note.

In addition, Thill noted that Microsoft's ( MSFT ) push into network security could have longer-term implications for cybersecurity companies, such as Cloudflare ( NET ), Fortinet ( FTNT ), Check Point Software ( CHKP ), Palo Alto Networks ( PANW ) and Zscaler ( ZS ).

Shares of Microsoft ( MSFT ) and Broadcom ( AVGO ) were up 2% and 1.5%, respectively, in early morning Wednesday trading.

More on tech M&A

• Broadcom's acquisition of VMware gets conditional EU approval
• Microsoft gets 'trophy moment' with Activision court win: Wedbush
• Consolidated Comms holder wants company to reject $4/share takeover offer (update)

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