The divestment of Gearbox Entertainment marked the end of Embracer’s restructuring program which started in June 2023. Embracer sold Gearbox Entertainment to Take-Two Interactive, the parent company of Grand Theft Auto maker Rockstar Games, for $460 million.
The 9-month-old restructuring program by the Swedish gaming group led to the loss of over 1,300 jobs and the cancelation of over two dozen games. Interestingly, on the day that the restructuring ended, the company was already considering acquisitions again.
During the investor call, the company’s CEO Lars Wingefors was asked if Embracer had plans to start acquiring studios again. In response the CEO said it was “way too early” to start “the M&A engines”—referring to mergers and acquisitions.
“We are ending the restructuring program now, end of March, and the Gearbox restructuring process has been part of that program,” said Wingefors as seen on RPS.
“Now we are getting approached, I would say not quite daily, but on a weekly basis, by companies that would like to acquire certain assets within the group. I’ve been very clear that they’re not for sale, because they’re a very important part for the group and for the shareholders of the group going forward.”
According to Wingefors, the companies they sold had “negative cashflow”, and divesting the companies will help Embracer become more “cashflow generative”. Some studios were not so lucky during the Embracer restructuring and were closed.
Some of the shuttered studios shaped the childhood memories of some gamers which led to outbursts when Embracer announced that they had been shuttered with immediate effect. One of the studios that closed during the restructuring run was Volition, the Saints Row developer. Free Radical Design, the developer of TimeSplitters also suffered the same fate.
Embracer is still considering the future of the group
Selling off assets and shuttering studios doesn’t mean Embracer is out of the woods. The Swedish group is still swimming in debt—albeit the proceeds from the divested companies would help it to lower its debt profile. The thought of considering more acquisitions currently doesn’t sound sensible at all. But what really is in the way that Embracer operates?
“Looking to do more [mergers and acquisitions] deals – I think it’s way too early to start talking about restarting the M&A engines again,” Wingefors said.
“Now we are in the late phases of the consideration into the future of the group, and that’s our highest focus and priority – how we set up ourselves and structure ourselves, and utilize our assets we have within the group, and have them work together, and how we leverage them better working together, utilizing different functions, I think that’s our focus right now, to increase profitability and cashflow generation, by simply making better products and games.”
Before things started falling apart for the Swedish group, Embracer owned 138 studios, most of which had been acquired within the last five years. Embracer’s bloated portfolio of studios included:
- 3D Realms (Ghostrunner)
- 4A Games (Metro franchise)
- Coffee Stain (Goat Simulator)
- Crystal Dynamics (Tomb Raider)
- Dambuster Studios (Dead Island)
- Eidos Montreal (Deus Ex)
- Flying Wild Hog (Shadow Warrior, Evil West)
- Gearbox (Borderlands)
- Ghost Ship Games (Deep Rock Galactic)
- New World Interactive (Insurgency)
- Perfect World (Persona 5: The Phantom X)
- Piranha Bytes (Gothic franchise, Elex)
- Saber Interactive
- Tuxedo Labs (Teardown)
- Volition (Saints Row franchise)
- Warhorse Studio (Kingdom Come: Deliverance)
Maintaining one studio is tough, especially in an unpredictable gaming industry with rapidly changing tastes. Stacking up over 100 studios was like building a skyscraper on sand. It was only a matter of time before things started falling apart. The fact that Embracer is still considering M&A simply means they have not learned the lesson yet.
In a statement that accompanied the company’s confirmation of the Gearbox deal, Wingefors said, “Through the transaction, we lower business risk and improve profitability as we transition to becoming a leaner and more focused company”.
One fact that many professionals and players in the gaming industry would agree on is that Embracer is far better as a leaner company—and some will strongly appreciate they get even leaner.
