Apparently out of nowhere, it was announced this week that the Borderlands studio Gearbox, which has been operating independently since its inception 21 years ago, has sold the company to the Swedish Embracer Group for up to $ 1.3 billion. Gearbox CEO and founder Randy Pitchford has now shed some light on why he entered into the agreement and why he believes it will be in the best interests of the company.
In an interview with VentureBeat, Pitchford said the sale of his company had never occurred to him in a serious way before. ‘I have always been allergic to the concept of [mergers and acquisitions]he said. He said that “every partner company” Gearbox has worked with over the years has suggested the possibility of a buyout on Gearbox – either through tips or an open offer – but Pitchford has always said no.
“A lot of companies we’ve never worked with would call us with a cold call, an unsolicited suggestion. I’ve always been allergic to it,” Pitchford said.
Pitchford was wary of the earlier buyout proposals because a typical acquisition would mean that the acquired company would be “centralized” in its parent company. “It’s more of an innovative approach. It assumes we can not make our own way, that we do not know how to win with what we are experts for,” he said.
But at Embracer Group, Gearbox has been given the ability to stay decentralized from the corporate structure. He said Lars Wingefors of Embracer told him: ” We need to do the opposite of control. We need to fuel them. ” Let’s see how fast and far enterprise groups like Gearbox and the other members of the Embracer Group can run if empowered instead of held back, ” Pitchford said.
Pitchford said he did not realize that these types of arrangements could even exist.
“When I realized what Lars built, what he did and what the strategy was, it’s simple and obvious, yet it’s completely counter-intuitive to the way the rest of the industry works,” he said. “I realized that Lars is not the suit in which I flew around. Lars is me; I just came from the point of view of capital. I come out to build the product.”
Also in the interview, Pitchford said Gearbox is an attractive acquisition target because the studio and its games never lose money. Not all of Gearbox’s games are already home – Battleborn, for example, has just been discontinued – but the company has been profitable annually since 1999, Pitchford said.
“We’ve never lost money. For us, it’s part of it – I feel like Neo in the Matrix after seeing it. I just need more capital so we can do it faster and better,” he said. .
Pitchford owns most of Gearbox, so he makes a lot of money from the sale, but he also structured the studio in a unique way. Pitchford owns 70% of Gearbox, while employees own the remaining 30%. This setup, coupled with what Pitchford called the “most generous royalty bonus program in the history of the industry” for its employees, is why people like to work at Gearbox and stick with it.
“It has created an alignment between each person participating in the profitability of our products,” he said.
The agreement with Gearbox with Embracer is structured in such a way that Gearbox can earn even more money if it reaches certain performance milestones.
Despite the sale, Gearbox will continue to work with 2K Games on the Borderlands series, although no new titles have been announced in the franchise.
Pitchford also recently revealed that the studio is also incubating several new game ideas that he says could shake up the video game industry like Borderlands did.
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