killer_roach wrote on Aug 16, 2012, 22:58:
Beamer wrote on Aug 16, 2012, 22:39:
killer_roach wrote on Aug 16, 2012, 22:27:
Kosumo wrote on Aug 16, 2012, 21:40:
Anyone from Vegus here? What are the odds on of Notch buying E.A. by 2025?
My guess? EA won't exist in its present form by 2025. Talk is that EA wants to go private, and, if they're bought by a private equity firm, they'll likely be disassembled and the constituent parts would likely then be sold off.
What "constituent parts" do you think there are, and what value do you think they have? Do you think they're going to sell Westwood and Origin separately?
You don't understand what private equity is, do you. What KKR does?
Most private equity firms would realize that the parts of EA are more valuable than the whole. Origin and Westwood no longer exist, but the various other studios (Black Box, Tiburon, Bioware) all have significant value, their IP catalog has value, and their publishing business has value. I think it would be hard for a private equity firm to look at EA and go "yeah, we're going to get our best return on investment by leaving this monolithic entity intact, considering how little they're able to leverage their constituent parts".
How, exactly, are the pieces worth more than the whole? In order for that to be true:
1) The pieces need some sort of special value. Usually employees are not good enough, as employees can leave. Game studios that do not own their own IP have nothing of value beyond their employees
2) There needs to be a buyer. Who, exactly, do you think would buy these pieces from EA? Who out there wants Black Box or Tiburon?
Private equity firms buy to turn around, this is true. And sometimes that means selling parts off, this is also true. But typically that's cutting the fat, so to speak. If they bought a conglomerate like, say, Disney, they may investigate this. With Disney you can divest, say, the publishing business, with no true issue. The publishing business isn't directly related to their core business and can be seen as a drag or a distraction. There are other publishers out there that may want it, and it can be somewhat easily made to stand alone if need be.
This isn't true for EA. For one, there aren't really buyers out there. Activision may be on the block itself, as Vivendi is doing what I said in the above paragraph due to an overwhelming debt burden in their main business, and certainly will not take on more debt for more studios. THQ is borderline DOA. That leaves who, Take 2? Will Take 2 alone buy more from KKR than KKR spent on EA? Ubisoft? They'd possibly take some. Zenimax? Hey, guess what, the other PE firm they're saying is interested in EA already owns Zenimax! (And, interestingly, has't broken them up. Shocking, I know!)
Furthermore, EA isn't easily broken up. Even if you can find someone dumb enough to buy a studio whose employees can just walk (when a small dev is purchased it's typically for IP and the heads of the studio are either quickly shuttled out, because they aren't wanted, or they sign long-term agreements as part of the deal to make sure the brain power stays intact. You cannot force them to do this when you jettison the part) you have the issue that these studios can't survive alone. They need to be in a publisher. You can't just sell them to, say, some conglomerate, like you can other companies. They have shared services (e.g., legal, payroll, fp&a, marketing, real estate, design, etc.) It's very easy to add studios to this infrastructure, as you don't need to add much headcount, but in order for a small studio to survive on its own it spends a great deal on this headcount when no longer shared.
So, basically, the individual pieces of EA have no value, they aren't any publishers looking to grow at the moment, and no non-games entity can successfully run these.
Now, another point - if EA was worth more separately than as a whole, why the hell would they get involved with private equity? PE firms either take a company over hostily, which they aren't doing here because EA sought them out, or they take over distressed firms that are desperate and failing. EA may be in some harder times, but they're far from distressed, desperate or failing. If they were truly no longer worth the sum of their parts they'd sell some of those parts themselves to get the value for their shareholders rather than some PE firms' partners.
Lastly, one of the two PE firms the Post is claiming EA is talking to already owns Zenimax. Has Zenimax been split up? No, in fact it's acquired studios recently.
I hate to be a jerk about this, but you're just throwing out nonsense without thinking about it. Seriously, there's no way EAs IP is worth more than the company, and the studios you're talking about have no value. You're making claims due to a dislike of EA without stopping to think about how valid they are, or investigating to figure out how PE firms work (hint: not the way bloggers are claiming Bain Capital works.)