When one company buys another, like Microsoft and Activision, where does the money go?

Question

When a deal like Microsoft buying Activision goes through, does the money that the company is paying go to the company being bought? Does it go to the shareholders? Does the Activision stock just go away?

The reason I am confused is, if Microsoft gives Activision billions of dollars, at the end of the day, isn’t Microsoft effectively giving themself billions of dollars?

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I’m using Microsoft and Activision as an example, but I am curious about how this works in general.

In: 2

Answer 1

People who own portions (shares) in the company getting taken over get paid money in proportion to the amount of the company they own, sometimes instead of cash they are paid in shares in the new company.