Activision sexual misconduct fallout prompted Microsoft to pursue deal

Late last year, as employees at Activision Blizzard and Chief Executive Officer Bobby Kotick (pictured) were reeling from accusations that Kotick knew of sexual harassment at the company for years, a group of Microsoft senior executives suggested that Xbox head Phil Spencer check in with the embattled CEO.

The goal, according to a person familiar with the matter, was to offer support to a key partner and make it clear that Microsoft had concerns about the treatment of women at Activision. Another aim: to ensure that if Kotick and the board were willing to sell the company, Microsoft would be well positioned to make an offer. After a few phone calls over a two-week period, discussions evolved. That led to Tuesday’s announcement.

Earlier, Microsoft senior executives had been dropping hints for months that they were looking for deals. CEO Satya Nadella had been searching since at least the summer of 2020 for an acquisition that would deliver the software maker a stable of consumer users. In November, Spencer reiterated his frequently stated position that he was on the hunt for acquisitions, noting Xbox in particular wanted deals that added.

About the same time in November, the pressure increased on Activision after a Wall Street Journal story detailed allegations of rape at one of the game publisher’s studios and said Kotick had been informed of the alleged incidents, which occurred in 2016 and 2017, as well as an out-of-court settlement, and failed to report them to the board.

Behind the scenes, Spencer was working on a merger approach. Microsoft's pitch, as with its other large gaming deals, heavily leveraged Spencer’s decades-long industry experience.