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Microsoft’s Inflection deal gets a closer look
The UK’s antitrust regulator is scrutinizing Microsoft’s unique relationship with Inflection AI. The PC giant did what some have called an “acqui-hire” — not buying the company outright, but rather hiring many of its former leaders and employees instead.
Microsoft poached the once-$4 billion startup’s co-founders Mustafa Suleyman and Karén Simonyan as well as “most of its staff.” It paid $650 million to license Inflection’s technology, which is how investors will get their returns. Now, the UK’s Competition and Markets Authority is looking at whether the deal is a “de facto merger,” a decision it’s expected to make by Sept. 11.
Microsoft is already facing scrutiny for its $13 billion investment in OpenAI in the US and UK, choosing to relinquish its non-voting board seat to stave off further criticism last week. We’re watching for how Microsoft fares in court, and whether it changes its tack in competing for the top talent and tech in AI development.Mustafa Suleyman, Co-Founder and CEO at Inflection AI, attends the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, January 18, 2024.
An inflection point for Microsoft
Microsoft made headlines last week, hiring Mustafa Suleyman to lead its internal AI group. Suleyman is a big name in the world of artificial intelligence, namely because he co-founded the influential British research lab DeepMind that was acquired by Google in 2014 for over $500 million. But in hiring Suleyman, Microsoft also kinda, maybe, sorta acquired his current AI startup, called Inflection AI.
Microsoft didn’t just hire Suleyman and co-founder Karén Simonyan, but it hired “most of the staff” of the $4 billion startup. It then paid the remaining husk of Inflection $650 million to license its technology, which Inflection is using to pay off its remaining investors. It’s as close to an acquisition as you can get without actually buying a company. And there's a good reason for this: The current antitrust environment is tough for tech. The government has a watchful eye on mergers and so, Big Tech has often opted against buying startups outright: We’ve seen Microsoft invest $13 billion in OpenAI, while Amazon and Google have each poured billions each into Anthropic.
But the government has broad authority over mergers, even if they’re partial or untraditional in nature, experts told GZERO recently. Put simply, we’d be surprised if this acqui-hire of sorts is enough to deter the government’s antitrust enforcers, who are already sniffing around Microsoft’s investment and power over OpenAI.