If you were Activision, what would you buy with $3 billion?

11:00 AM on 03.06.2009   |   Dale North

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Right now, having extra in the bank and no overdue bills or debt isn't typical for an American. But American games publisher Activision is doing totally fine, with about $3 billion in cash and no debt. And, as an American, what do you do when you have money burning a hole in your pocket? You buy stuff.

If you step back and look at Activision's games offerings as a whole, there's plenty of areas that they have down pat, like music games. But to stay on top, even with as well as they're doing, they'll have to expand their product line and think about the big picture. Maybe even think internationally.

It seems that Activision boss Mike Griffith is doing just that. And he couldn't have picked a better time, either. The current recession makes for easy purchases for one that has money in the bank, and it seems that Griffith is keeping his eye on certain unnamed targets to do just that.

We thought it would be fun to spend his money for him. So, we pose this question:

If you were Activision, and you were looking to spend some cash, what would you buy right now?

Ubisoft? Not likely.

Me? My first thought was Ubisoft, but that was just an off-the-cuff request that took no business sense into the equation. See, I'm not an analyst. Regardless, here's a big company with lots of great IPs and tons of potential. But not so fast: it's not that easy to just drop cash and buy a company. Besides, another major player in games has a big stake in Ubisoft.

First off, Electronic Entertainment Design and Research analyst Jesse Divnich tells us that Ubisoft would likely go for $1.5 billion or more; Activision wouldn't mess with spending that much right now.

"Ubisoft is not for sale and given their resources they could probably prevent a hostile take-over if they wanted to," Divnich says.

There's no denying that Ubisoft would be a great buy, though. Wedbush Morgan analyst Michael Pachter agrees. "Ubi[soft] is a great company," he says, "but EA has 17% of stock and 25% of vote," so that puchase just doesn't seem likely.

In fact, Divnich says that Ubisoft would also be on the spending side of things, and points to some recent acquisitions as proof.

"On the subject of acquisitions, Ubisoft is likely to be more aggressive in that department than both Activision and EA for the next 2 years," he says. "Case in point is Ubisoft’s recent acquisition of Action Pants Studios in Vancouver and the publishing deal with Midway on Wheelman."

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THQ?

Okay, then let's think smaller. How about THQ? They have some solid properties, and we hear that they're not doing too hot financially lately. That would make an easy buy, right?

My lack of analyst training rears its ugly head again as Pachter shoots this one down: "THQ [is] too small for them to bother with."

Divnich reminds that THQ, while being a great studio, doesn't have that many wholly-owned IPs, which makes its worth limited to other publishers. Sure, the WWE and SpongeBob franchises are worth something, but they're both licensed, and not owned by THQ.

"Even though THQ has some talented developers, a publisher is likely only looking to pick up successful wholly owned IPs. That would narrow the list down to a few Nintendo DS IPs and Saints Row."

What makes more sense is for companies to pick up the individual IPs from THQ. 

Ok, then how about Midway?

We all know that they're in the financial crapper right now. Hell, they're even selling off Mortal Kombat.  Wait -- I think I just answered my own question. They would be looking at buying an IP, and not a failing publisher. Makes sense, right?

Maybe not. You'd probably want the guys that made the game along with the game. According to what Michael Pachter told GameDaily, it seems that he's thinking along the same lines. 

"I don't think ATVI would buy Mortal Kombat unless they got the developers, too. That franchise is really a product of the creative, not just the IP, and I don't know if the developers have any interest in working for ACVI."

But if you think about Activision boss Mike Griffith's goals of expanding their product line, and then realize that Activision doesn't have a solid fighting game franchise, then the purchase starts to make more sense. 

Mike Hickey of Janco Partners at least sees Activision buying the IP:

"Activision currently lacks a distinctive fighting game in their IP portfolio and has been open about using their strong cash position for IP acquisition," he says.

Buying IPs is the name of game here.

We'll put down Mortal Kombat as a maybe. Divnich thinks that Ubisoft would do more buying than anyone, though.

"For Midway, their titles will soon go up for auction. Personally, I think Ubisoft will pick up most of the titles, they seem to be more aggressive lately with making acquisitions while EA and Activision are more focused internally."

So, rather than publishers, Activision can sit back and wait, and then bid on the IPs and licenses that they want of these companies that are slowly sinking.

So what is Activision going to buy, then?

It's clear that Activision has their eye on something. Mike Griffith basically said that he was shopping in a recent interview:

“The combination of Activision holding a fair amount of cash and presumably prices being depressed, not only for publicly traded companies, but also likely for new intellectual property licensing rights, should certainly create opportunities.”

So maybe a developer? Insomniac would be nice to have, wouldn't it? Maybe a developer along those lines? Who knows. 

Griffith definitely isn't telling. He's not going to just blow Activison's cash, though. He says that “we won’t rush to judgment just because we have cash. We will be very disciplined.”

They've recently surpassed Electronics Arts as biggest third-party publisher, and I'm sure they want to stay that way. I suppose we'll just have to wait and see what these "opportunities" turn out to be. 

What do you imagine Activision acquiring?