EA’s $55 billion megadeal will ripple across the gaming industry and cause its “black holes” to get even bigger

Electronic Arts, the video game giant behind mainstays like “Madden NFL” and “The Sims,” agreed to a blockbuster leveraged buyout (LBO) last week — the largest in history, at $55 billion. The group buying EA includes Saudi Arabia’s sovereign wealth fund, PIF, along with private equity firms Silver Lake and Jared Kushner’s Affinity Partners. To cover the interest payments, EA will likely have to find more revenue and cut costs, moves straight out of private equity’s LBO playbook.

To put it another way: we’re likely to see more ads, more layoffs, and higher prices from EA.

Some parties involved in the deal expect that to pay off its newfound debts, the company will boost its profits in the coming years by replacing the work of some voice actors, developers, and testers with AI, the Financial Times reported.

Bigger anchor games, which some in the industry refer to as “black hole games” for their ability to dwarf competition and consume millions of players’ entire gaming appetites, have become a holy grail for major publishers in recent years.

As juggernauts battle it out for attention, smaller new games struggle to compete on the ground level. The number of new Steam games that grossed at least $100,000 was smaller in 2024 than in 2016, while the number of game releases surged 300% and user numbers grew 250%.

EA’s immediate future will likely be one focused even more on big revenue-generating titles like “EA Sports FC,” “Madden NFL,” and “Apex Legends” — a move that’s been seen in PIF’s other major gaming acquisition, Scopely, which in March bought the studio behind “Pokémon Go” for $3.5 billion.

After the EA deal closes, which is expected during its fiscal first quarter next year, it won’t have to worry about the prying eyes of public investors. But it will have to worry about a mountain of debt.

The Takeaway

A 2019 study by researchers at California State Polytechnic University found that 20% of publicly traded companies taken private through LBOs went bankrupt within a decade, compared to the control group’s 2% bankruptcy rate.

Of course, the deal could just as easily become a slam dunk from a business sense, given the financial strength of EA’s buyers, particularly the Saudi PIF, which controlled nearly $1 trillion in assets last year. That fortune could boost EA’s marketing budget, elevating sales — so there’s a chance that EA’s debt may not be as much of a concern.

Private equity is moving to make EA suck even more!