Microsoft’s $69 billion acquisition of Activision Blizzard is the largest acquisition of a video gaming company in history. Activision Blizzard is the publisher of Call of Duty, World of Warcraft, Candy Crush, and numerous other popular video games. It also is Microsoft’s largest acquisition to date.

The deal, which was signed in January 2022, featured a number of battles with government regulators and lawsuits before it finally closed 20 months later in October 2023. At times, it was not clear whether the deal would ultimately close.

Most of the regulatory probes and lawsuits were brought on anti-competition grounds. In December 2022, the U.S. Federal Trade Commission (FTC) filed a lawsuit to block the deal. Microsoft was granted the right to close in June 2023 after a U.S. federal judge denied the FTC’s bid to block the merger. In April 2023, the U.K. Competition and Markets Authority (CMA) blocked the deal. The CMA blessed the deal only after Microsoft came to an agreement with the CMA to modify the terms of the deal so that Microsoft would not acquire certain cloud rights for Activision games.

While it received less media attention, another lawsuit filed in the Delaware Court of Chancery in November 2022 has had important implications for business law. The lawsuit claimed that the merger agreement approval process was flawed and violated Delaware law.

Specifically, the plaintiffs claimed that the merger approval process failed to comply with Sections 251 and 141 of the Delaware General Corporation Law (DGCL). In January 2022, the board of directors of Activision Blizzard reviewed and approved a then-current draft of the merger agreement. The draft merger agreement that the board approved did not contain the Activision disclosure schedules, the purchase price, the target company name, or the certificate of incorporation for the post-merger company attached as an exhibit. It is common in merger transactions to blank out the name of the merger target and the purchase price until just before the merger signing in order to reduce the risk of confidential leaks. The final version of the merger agreement filled in these omitted items, but the final version of the merger agreement was not reviewed or approved by the Activision board.

The Delaware court ruled that the merger approval process violated Section 251(b) of the DGCL because the board did not review a version of the draft merger agreement that contained all “essential” elements. Even though the merger was approved by 98% of all Activision stockholders, the court also held that Section 251(c) was violated. Section 251(c) requires that a notice of a stockholder meeting called for the purpose of approving a merger agreement must contain the merger agreement or a brief summary of it. Although the merger agreement was attached to the proxy notice, it did not attach a copy of the post-merger company’s certificate of incorporation. The court deemed this a breach of Section 251(c) of the DGCL.

The Delaware court’s holding in the Activision merger case demonstrates the importance of statutory compliance. The court concluded that certain provisions of the DGCL were violated based on a strict reading of the statutory requirements. It also illustrates that boards of directors should review and approve a substantially final version of the merger agreement.