The mergers and acquisitions field is an exciting one, but it's also fraught with uncertainty and risk. Investors always have to be aware of the risk that a promising deal might not go through. And until the two parties close, there's always a chance that something might arise that could put a stop to an acquisition and cause substantial financial damage to those who were counting on it happening.

For well over a year now, many investors in Activision Blizzard (ATVI) have waited to see if the video game giant would see Microsoft's (MSFT 0.09%) acquisition move forward. Ups and downs in Activision's stock during 2022 and early 2023 reflected changing levels of doubt about whether the two companies would get a deal done. Unfortunately for those who had hoped for a combination, it now appears that Activision might have to go it alone. But for those who had been disappointed at the prospects of not getting to invest in the video game pioneer's future, the latest news could be a positive.

Why the Activision-Microsoft deal might be dead

Regulators in the U.K. weighed in on the competitive impacts of Microsoft's acquisition of Activision, and they weren't happy with what they saw. The Competition and Markets Authority (CMA) said that it believed that the combination would reduce the level of innovation in the video gaming industry, and it could potentially reduce the amount of choice available to gamers, particularly in the cloud gaming niche.

Microsoft had already admitted that the acquisition would have some impact on competitive conditions in the industry, and that's why it had offered substantial concessions in order to get a deal done. Yet the British CMA expressed doubt about whether those moves would have been sufficient to restore full competition.

Shares of Activision dropped 11% at midday on Wednesday on the news. That brought the stock price to just over $77 per share, well below the $95 per share in cash that Microsoft had offered to pay for the video game maker's stock in January 2022.

Dealing with disappointment

Clearly, the response in the stock price suggests that many Activision investors were disappointed with the decision. Both Microsoft and Activision intend to appeal the ruling, with the U.K. Competition Appeals Tribunal standing by to hear arguments in the future.

However, U.K. regulators aren't the only ones that have called the deal into question. Both in the U.S. and in the European Union, those charged with assessing competitive impacts of mergers and acquisitions have taken a close look at Microsoft and Activision to make their own determinations about the wisdom of allowing a combination to go forward. Indeed, the stock has remained well below the $95 buyout price throughout most of the past 15 months, as shareholders acknowledged the difficulty the two companies would have convincing regulators to allow the acquisition to happen.

Good news for Activision?

Yet for many investors, the idea of Activision continuing independently is actually promising. Strong results from the video game company show the ongoing value of the key Call of Duty franchise and Activision's stable of other hit games continue to churn out strong financial performance. Cash flow has increased markedly, and Activision's leadership believes that the business is likely to keep generating even more cash in the years to come.

Moreover, a Microsoft failure could result in a big payday for Activision. The two parties negotiated a $3 billion breakup fee if the deal doesn't move forward before July. The contractual provision specifically makes reference to injunctions or other steps taken by regulators that result from antitrust-related concerns. With roughly 784 million shares outstanding, that would represent about a $4-per-share boost to Activision's value.

For now, Activision remains convinced that anticompetitive concerns about the merger are unfounded. Yet with the stock now down significantly, investors might find themselves in a win-win scenario. Either regulators change their minds and shareholders get an $18-per-share profit relatively quickly, or the deal gets stopped and shareholders continue to own stock in a strong business. That's not a bad result for those looking at buying shares of Activision today.