With the path to an exit already so thin, venture capital investors are pooling their collective weight to publicly condemn the Federal Trade Commission and try to protect one of the only clear paths to exit they have right now: M&A.
Yesterday, 27 venture capital firms—including Kholsa Ventures, NEA, Tiger Global, M12 and NFX—signed a statement of support to an amicus brief a handful of VC firms had filed in court earlier this year regarding the federal agency’s continuous efforts to block the Microsoft-Activision Blizzard deal. In the statement, the VC firms argued that the FTC’s strategy as it appeals a judge’s decision this summer would harm the broader ecosystem.
“If the FTC’s approach were adopted, many more acquisitions would be subject to lengthy and expensive regulatory review and litigation that few if any transactions would be able to withstand,” the statement said, noting that “many transactions” would be “abandoned upon challenge or never pursued, grinding American innovation to a halt.”
The statement comes ahead of an upcoming Ninth Circuit Court of Appeals hearing, where the FTC will, again, attempt to block Microsoft from acquiring Activision Blizzard. If this sounds like deja vu, it’s because a California judge this summer denied the FTC’s injunction request to stop the deal after Microsoft agreed to, among other things, keep Call of Duty on PlayStation for 10 years, add the game to Switch, and bring Activision content to several cloud gaming services.
After the big win in court—and after the U.K.’s competitive watchdog backed down as well—Microsoft finally closed its $69 billion deal for the video game company in October, nearly 22 months after it agreed to acquire the company. Even so, the FTC has refused to back down, appealing the decision and continuing to fight the deal after its close.
Venture capitalists, in their statement, said they were concerned that the FTC’s recent enforcement actions and policy initiatives could end up clogging up an important means for them to realize gains on their investments. “Exits through acquisition are critical to creating and maintaining a self-sustaining cycle of innovation,” the letter wrote.
It’s not all that surprising that some VC firms are willing to go public right now with their distaste toward the current administration’s approach to M&A. In the last two years, IPOs have been few and far between. With few distributions available, returns are low and limited partner dollars are tied up and unavailable during fundraising. The Biden Administration’s federal trade agency has been aggressive under Lina Khan, making these difficult market dynamics all the more painful to venture capitalists.
While it seems unlikely the statements will actually carry much weight in the courtroom, venture capitalists are making their dissatisfaction clear.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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