Embracer Group has announced the sale of their Gearbox studio to Take-Two for $460M. This comes on the back of Embracer selling Saber Interactive for $247M two weeks ago.
Historically, Embracer Group has spent billions on a roll-up strategy – buying a significant number of studios and some of the world’s largest IPs (including Lord of the Rings). They were considered one of the most ascendant games holding companies until mid-2023, when they purportedly lost a $2B fundraising deal with Savvy Games Group.
In addition to this roll-up, they pursued a “federated states” strategy of management – largely letting the studios the bought remain intact and run themselves, without centralizing power or sharing resources across their portfolio.
Why does this matter?
In an era of cheap money, roll-ups make sense. You can arbitrage the private market valuations of a company to the public market valuations (which are higher). The key question right now is: In an era of real interest rates, does the cost of rampant consolidation without centralizing power and sharing resources make sense?
We’ve seen disparate levels of success, but it seems, at a minimum, that Embracer was a little more aggressive than their balance sheet could allow and they’re now rationalizing their business.
Other companies who have pursued similar strategies would do well to consolidate power under a single umbrella and share resources for things like go-to-market and customer support across their portfolio of games studios.
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