Being a public company, as a rule, is not suitable for gaming enterprises.
It is stupid, and it can sound a little sharply or harmless, but I not only say. This was a widespread opinion, which I probably found the most amazing when I first began to work as a business officer in this sector and began to speak with senior leaders.
These were people who managed public firms, and in some cases the very people who decided to offer these firms in the first place. But again and again, people in these positions would say – sometimes in private, and sometimes completely open – that the company's IPO was one of the biggest regrets.
The exclusion of IPO, of course, is financial. This can be a huge injection of money for business, not to mention a very long -awaited salary for investors, managers and employees. The main and well -controlled IPO can increase growth in the stratosphere, opening resources for competition at a level that was previously not possible for business.
Nevertheless, the source source was simple: after the IPO, business management is inextricably worried with the management of shares, relations with investors and public reports. A stable metrona in a report on quarterly income is the company's heartbeat.
For some enterprises, this is absolutely normal. It can even be positive, a good way to concentrate eyes and minds on clear goals. However, for creative enterprises, this can be incredibly burdensome with which you need to deal with. In the worst case, this can lead to a very destructive incorrect agreement of the company's goals.
In the end, games are developed on many years of cycles, and they are a creative effort, and therefore, to some extent, he is stochastic, because “doing this is fun” is not a task that easily and carefully fits into the gantt chart. Sometimes games need extra time to find pleasure. But this is a difficult solution, if everything you do should be agreed with the quarterly and annual income schedule.
Sometimes creative teams should explore and take risks – it is difficult to do when everything should be transparent and explained by skeptical main shareholders representing banks and pension funds.
All these expressions of regrets that they are publicly traded – of course, thanks to gratitude for the opportunities that created cash, they returned to mind this week, when it was announced that EA would become private in a transaction of $ 55 billion.
This is the largest ransom of private joint -stock capital in history (where using use means that a very large amount of debt is used to finance the transaction, creating a “lever” for buyers). Although, of course, in simple dollar conditions, this is less than $ 75.4 billion Microsoft paid for Activision Blizzard a couple of years agoField
Most Positive or optimistic comments This transaction was focused on the fact that the EA would no longer respond to shareholders and the quarterly reports connected by these metronome cells. Theoretically, at least this should free the company and its creative teams, allowing them to think about their games and development cycles in more strategic, long -term methods, and not constantly monitor the numbers of the upcoming quarter.
It is fair to be optimistic; This is due to all these comments that I have heard for many years about the problems of being a publicly accessible game company. Of course, the scale of such a company, such as EA, provides a lot of isolation from these issues – companies that really fight the fact that their publicly available are listed, are small firms with only a few games in development, for which delays can mean entire quarters with small or without income.
Nevertheless, even such a large company as EA could benefit from the opportunity to take a step back and think about its business and products in a long -term and strategic way, and not nervously observe the movements of prices for shares.
Let me return to everything “removed”, although, because it is extremely important.
A lot of lighting this week was focused on Who is worth the ransom -Saudi sovereign wealth Fund PIF (which already had about 10% EA), along with the Silver Lake and Affinite Partners technological investment group, an investment group led by Donald Trump Jared Kushner. This is a variegation, and this is surely, and concern about the political intentions of the groups that some of the world's largest entertainment brands will now control, are certainly valid.
What is perhaps even more important is not who makes a ransom, but how they do it. This is a completely different deal with one Microsoft to get Blizzard Activision. Microsoft paid the money, plunged into her extensive military chest for purchase. PIF, Silver Lake, and others. They also pay a lot of money for EA – about $ 35 billion – but the remaining $ 20 billion borrows, which means that recently a private EA will be burdened with a long burden almost three times higher than its annual income.
In other words, EA may no longer need to respond to shareholders – but this will replace them with creditors. The drabobit of the quarterly report and the nervous view of the price of the shares will disappear, but I'm not entirely sure that the need to serve a debt of $ 20 billion will be less burdensome. For reference, EA operating profit in 2010 amounted to about $ 1.5 billion. The USA, therefore, the debt that he takes on in this transaction is more than 13 times higher than annual profit.
In practice, such types of ransom with borrowed borrowed capital usually happen when investors consider a couple of key items. Firstly, that the business has very stable, predictable income – the main factor in the ability to consistently serve a large debt burden. This is perhaps more correct for EA than for most gaming companies, given its wide line of annual sports titles, but “stable and predictable income” is not historically not a strong game industry, which makes EA a rather unusual risk profile for such a transaction.
The second thing that investors usually consider when entering a ransom with borrowed rashes is that the income is not only stable, but also saving costs. This is common for transactions with private actions in general; These companies, as a rule, believe that they can realize significant measures to reduce costs and efficiency in the enterprises that they conduct, often promoting significant restructuring plans shortly after the transaction.
This does not always go very well for involved enterprises. One shameful strategy is to use a ransom with a borrowed tool for acquiring companies with very important fixed assets, such as retail networks that own land and buildings. Great for people who earned money from the transaction; It is terrible for the company's permanent business, currently constantly burdened with high rental costs.
Most likely, a more general strategy for reducing costs, which means loss of work
In the case of EA, his most valuable assets are his brands, and it will be interesting – and a little relates to – see how the new management strategy will cope with these assets financially. Most likely, a more general strategy for reducing costs, which means loss of work is one blow after many years of dismissal throughout the industry. In the long run, the private EA, which comes out of this, can be a less risky company, simply because controlling its cost and maintaining income stable and predictable will be crucial for the processing of this debt burden.
The company positively lies in the fact that it will be one of the jewelry in the crown of the PEF from the point of view of the franchise of the media, and the Saudi Fund will strive to preserve it as a prestige -publisher – an instinct that will probably protect the EA from the worst excess of an asset of a private asset.
Nevertheless, even with the burdensome nature that it was burdensome, it was raised by a publicly traded company – and even considering that EA tried my best to find growth over the past few years, therefore, of course, some change is necessary – it is difficult to consider as a reason for what, except for the most careful optimism. The publisher who needs reporting in the markets may have his own incentives, but the publisher who needs to report financiers, to whom they $ 20 billion, is even a heavier burden.
