WSJ: Videogame Giant Electronic Arts Near Roughly $50 Billion Deal to Go Private (UPDATE: Acquired by PIF, Silver Lake, and Affinity Partners)

[Higher Tech]

In general, it's due to how private equity is allowed to leverage debt to make the purchase that they don't have, and likely never would've had. Essentially, the invest funds are borrowing money against the value of the company they're trying to buy in order to buy said company. It'd be like trying to get a mortgage to buy a house using money from a Home Equity Line of Credit based on the equity that the current owners have in the home. If someone like you or I tried doing that, we're probably eating a couple of years for mortgage fraud.

What makes it worse is that the way these leveraged buyouts work, they basically work as if the acquired company took out a loan against its own value (which is why news of these types of acquisitions almost always leaks; it boosts the value of the company), adding that money to whatever the gross payout for shareholders is, and then the invest fund acquires the company for a cash amount, plus assuming whatever debt the acquired company has on the books. So, in this case, if they sale is $55 million, and the company ends up with $20 billion in debt on the books after purchase, private equity REALLY only paid $35 billion cash, and had the company take out a $20 billion loan so they could buy out their shareholders. The acquired company typically remains a wholly owned subsidiary, so if the debt ends up tanking the company, its future bankruptcy doesn't hurt the investment fund, but its potential sale to someone else (usually during bankruptcy) DOES end up being money that goes straight to them. So, not only do they end up paying less out of pocket than they should have for the company, they did it at a discount, since these buyouts usually close at a lower rate than if controlling shares were purchased at market value. Even doubly so when you consider that technically the shareholder buyout is coming partially from debt their own company took out to buy them.

The whole process is done with a goal of extracting maximum value from the company in a five to seven year period, and then either filing for bankruptcy or selling to the next sucker that's willing to kick the debt can down the road.

That helps a lot. Good lookin out

 

[winb83]

Da fuq? EA taking on $20 billion in debt so some rich people can do a leveraged buyout and cash out? Sounds like a bad idea.

 

[Killer Instinct]

Crazy ain't it




Who would have thought



Tried to tell y'all dudes where things was headed in 2022

Dudes would have flipped out if it was MS buying EA, They'd rather them get bought out by a foreign entities. With that said, I think its better for Triple A gaming in this day in age if you can as developer land within a company that has major cash and private. It allows you to make games you want without worrying about "the board" as much.


Sadly that creates a problem much further down the line in the future were IP's are all over the place and locked off.

Yeah and the others owns a bunch of random stuff from all over and one of those groups has been in the console gaming business for a quarter of a century.


The lack of post and concerns on consolidation from folks track tho

You know what, you right.

Dudes just arguing their truths instead of any kinda facts.

GOD DAMN

 

[Gizmo_Duck]

GOD DAMN

nikka in here talking to a brickwall

 

[The Mad Titan]

GOD DAMN

nikka in here talking to a brickwall

That's always been the case, nothing new here.




i told y'all dummies who had all kinda words for me when you thought you was right about things. That when it is obvious you were wrong I wasn't going to let you forget.

 

[THE 101]

That Saudi flight simulator game about to be

 

[ORDER_66]

Da fuq? EA taking on $20 billion in debt so some rich people can do a leveraged buyout and cash out? Sounds like a bad idea.

I think they was in huge debt that's why they sold the company the amount of money these investors paid only paid off like half the debt i think... they still gonna make some cuts to take care of this debt... usually when you get bought out the investors take on everything including the debt. this is wild tho..

EA goes $20 billion in debt as part of its $55 billion buyout, and the BioWare fans who've already waited 8 years for Mass Effect 5 are terrified of how the company might cut costs

"It's over, Commander"

www.gamesradar.com

 

[Legal]

I think they was in huge debt that's why they sold the company the amount of money these investors paid only paid off like half the debt i think... they still gonna make some cuts to take care of this debt... usually when you get bought out the investors take on everything including the debt. this is wild tho..

EA goes $20 billion in debt as part of its $55 billion buyout, and the BioWare fans who've already waited 8 years for Mass Effect 5 are terrified of how the company might cut costs

"It's over, Commander"

www.gamesradar.com

Read the article again, breh. EA didn't have the debt going into the sale, they have $20 billion BECAUSE of the sale. They're running the leveraged buyout playbook about as basically as possible, down to asking where, exactly the money to pay back the $20 billion is supposed to come from.

The answer is almost always layoffs, especially with a company like EA, where the path to increasing revenue isn't exactly direct or clear.

 

[ORDER_66]

Read the article again, breh. EA didn't have the debt going into the sale, they have $20 billion BECAUSE of the sale. They're running the leveraged buyout playbook about as basically as possible, down to asking where, exactly the money to pay back the $20 billion is supposed to come from.

The answer is almost always layoffs, especially with a company like EA, where the path to increasing revenue isn't exactly direct or clear.

I know theyre gonna do layoffs... but the company still gotta pay off that debt if EA didnt have debt going into the sale then where did it come from???

 

[Legal]

I know theyre gonna do layoffs... but the company still gotta pay off that debt if EA didnt have debt going into the sale then where did it come from???

You really don't be reading the links you post. I mean, the headline even says "EA Goes $20 Billion in Debt AS PART OF its $55 Billion Buyout"

To make it as plain as possible, part of agreeing to sell is EA agreeing to take out a loan against their own value, effectively on behalf of the new owners so they can take that money and buy out the current shareholders. As is, they have little to no known debt, and really the only thing people were concerned about was that revenues have flattened out a bit. But even then, that's largely due to their limited release portfolio. If Madden or EA FC have a down year, they just don't have as many opportunities to make up that gap in revenue.

 

[ORDER_66]

You really don't be reading the links you post. I mean, the headline even says "EA Goes $20 Billion in Debt AS PART OF its $55 Billion Buyout"

To make it as plain as possible, part of agreeing to sell is EA agreeing to take out a loan against their own value, effectively on behalf of the new owners so they can take that money and buy out the current shareholders. As is, they have little to no known debt, and really the only thing people were concerned about was that revenues have flattened out a bit. But even then, that's largely due to their limited release portfolio. If Madden or EA FC have a down year, they just don't have as many opportunities to make up that gap in revenue.

that's wild... thx for the clarification

 

[duckbutta]

Damn a leveraged buyout

How is it even legal for this to be the way EA is bought

Instantly 20 billion in debt

Better buy every EA game coming out as a physical copy and shrink wrap it that shyt going to be worth a ton in 2065

 

[Scottie Drippin]

They've already said they're pushing a new AI initiative

I just don't see the upside here. There's no real estate to harvest for cash - this feels like it's just going to be a spectacular collapse and happen sooner than later

These people are CRAZY for gambling $50b on the whims of gamers. - especially with a company like EA. Don't they realize how eager people are to make a statement and see that company fail?

 

[Gizmo_Duck]

just don't see the upside here

There is no upside, EA is done

 

[O³ (O cubed)]

This reminds me when the Glazers bought Man Utd. The team has been mid ever since. Be prepared for more egregious money making schemes.