Microsoft once discussed buying Valve, Nintendo, and Warner Bros. as part of its long-term gaming expansion

A new document released as part of the FTC v. Microsoft case has shed light on more acquisition prospects discussed at the Redmond-based corporation. None of those deals ultimately materialized, but it is another interesting glimpse into Microsoft’s M&A strategy.

The document, which is surprisingly unredacted, was spotted by Axios’ Stephen Totilo. In August 2020, Xbox head Phil Spencer discussed potential M&A targets in an email with two Microsoft executives, EVP & commercial CMO Takeshi Numoto and EVP & CMO Chris Capossela.

Here is what Spencer said about potential M&A deals with Nintendo and Valve:

• Microsoft considered Nintendo the “prime asset,” with Spencer saying that if any US company would have a chance with the Japanese publisher, “we are probably in the best position”;
• The biggest issue with Nintendo was that the company was sitting “on a big pile of cash,” but Spencer noted that former Microsoft BoD member ValueAct bought $1.1 billion worth of Nintendo shares in April 2020 and the further push for its stock “could create opportunities for us”;
• The Xbox head thought that instead of any hostile actions towards the potential acquisition of Nintendo, Microsoft should play the long term;
• At the time, Microsoft also considered buying Valve, and the company’s board of directors were “fully supportive on either if opportunity arises”;
• According to Spencer, buying Nintendo at some point would be a career moment for him, and the potential deal would be a “good move for both companies.”

The second part of the unredacted email contains information about M&A discussions with Warner Bros. and ZeniMax. As we all know, Microsoft eventually acquired the latter for $7.5 billion, but here are some details Spencer shared with Capossela and Numoto:

• Microsoft BoD and CEO Satya Nadella were fine with Spencer going for all the deals with they made sense;
• The biggest issue with Warner Bros. was that Microsoft wouldn’t own any of the IP, which could hurt “long term flexibility”;
• Spencer noted that ZeniMax could double the company’s “content asset”, but the problem was that its business was “more core, less board, not mobile, more North American/European, etc.”

In Aug. 2020 Phil Spencer mulled prospects of buying Nintendo (or Valve), said Microsoft’s board “are fully supportive on either if opportunity arises”

Thought outside investment in N might create more opportunity for MS, but “I don’t think a hostile action would be a good move” pic.twitter.com/nHqQ5mxHbn

— Stephen Totilo (@stephentotilo) September 19, 2023

Earlier this year, another FTC filing revealed that at one point, Microsoft also eyed a potential acquistion of Sega gaming studios. As of April 2021, the company had over 100 game developers and publishers on its consideration list, including People Can Fly, Remedy, IO Interactive, Larian Studios, Bungie, Paradox Interactive, and Supergiant Games.