The first company they approached was Electronic Arts, they basically said "no, thanks." Nintendo was second and was less polite:
The team also looked to tap Microsoft’s deep financial resources to secure exclusive games. It approached various companies to propose an acquisition.The article also reveals Microsoft was in advanced talks with Square Enix. That deal didn't come to fruition because Square Enix wanted more money. Another firm that was in Microsoft's crosshairs was Mortal Kombat developer Midway Games.
BOB MCBREEN (head of business development): The first company we reached out to buy was EA. They said, “No, thanks,” and then Nintendo.
BACHUS Steve: made us go meet with Nintendo to see if they would consider being acquired. They just laughed their asses off. Like, imagine an hour of somebody just laughing at you. That was kind of how that meeting went.
This developer was very willing to make a deal but Microsoft couldn't figure out how to make it work because after shedding Midway's PlayStation business, the marketing, and the sales group, there was not a lot of value left.
Microsoft did purchase Bungie, which was facing financial struggles at the time, and that turned out to be a brilliant move as Halo became a hit series.