Former BioWare executive producer Mark Darrah has been sharing his thoughts on the $55 billion EA buyout, suggesting that the $20 billion of debt that the company will take on if the deal goes through is – like many fear – "likely going to mean layoffs and studio closures."
Although the acquisition is "subject to customary closing conditions, including receipt of required regulatory approvals and approval by EA stockholders," it's expected to close in the first quarter of FY2027. The buyers are investment firms Affinity Partners and Silver Lake, as well as Saudi Arabia's Public Investment Fund (PIF).
Speaking in a new video on his YouTube channel (below), Darrah notes that he's "not a financial analyst," but assuming that the acquisition goes ahead, he thinks EA taking on so much debt will leave it "in a dangerous position," as "if interest rates go up or a game does a little bit worse, you only have about $100 million of leeway in order to keep your head above water."
This means looking for cost-saving measures to deal with the debt, and while Darrah notes that "there are savings that come simply from the act of going public," those won't amount to the hundreds of millions that are really required. "Especially for a company as historically financially conservative as EA, you're going to be looking for additional cost savings," he continues. "And for a company where the majority of your costs come from people, that is likely going to mean layoffs and studio closures and a dramatic reduction in people."
The former BioWare veteran also discusses the potential of EA selling IPs, noting that, historically, it's not something that the company tends to do largely since "the individuals who would be responsible for making those decisions, for looking for those opportunities, are actually incentivized to not take risks." However, the deal closing could cause these incentives to change, which he suggests could lead to being "in a situation where what they really need to do is sell as much as they can."
And EA certainly has plenty to work with on that front. "EA has a huge repository of dormant IPs that are just sitting there dormant," he begins. "It seems unlikely that the new resulting structure is going to be eager to suddenly revive a bunch of those IPs. So, one option might be to sell the whole lot of them for $100 million if you could get it, because $100 million can come off the debt. You might even see them toying with the idea of shutting some of their existing studios. Maybe they shut them down, but maybe they look for opportunities to sell off entire studios or entire groups."
Darrah believes that keeping EA Sports intact "makes a ton of sense," while it may not for EA Entertainment and its non-sports releases. He adds: "You could imagine potentially all of EA Entertainment being sold off to another group with deep pockets, like, say, Sony. This deal has been in the works for a while. It is conceivable that EA's new structure was intentionally conceived with this action in mind."
Wrapping up his thoughts, Darrah says that "in the short term," the acquisition going ahead "almost definitely means a bunch of layoffs in game studios, but also in financial and PR roles. EA is going to shed a bunch of people. That is definitely bad."
Meanwhile, in the medium term, "it might mean studio closures, or it might mean studios being sold off, or IPs being sold off, which could be a good thing."
However, in the long term, it's "it's probably good for whatever EA still exists after all the dust settles, because by being a private company, they are able to approach their financials in the way that best suits the way the business is being run." What the company might look like at that point is another matter, though. "There is hope to be had here, but it's going to definitely be painful before that hope is going to come to fruition," Darrah concludes.
