Electronic Arts' $55B buyout doesn't add up

Power and prestige over profits.

The SuperJoost Playlist is a weekly take on gaming, tech, and entertainment by business professor and author Joost van Dreunen.

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The announcement today of a $55 billion buyout of Electronic Arts by a group of investors led by Saudi Arabia’s Public Investment Fund, PIF, evidently caught many people off guard.

One reason is the speed at which the deal is materializing, considering its size. From what I’m told, there were buyout discussions between EA’s management team and a private equity bank in early August, but these had stalled. Although EA maintains it regularly consults with bankers about potential deals, the silence in late August signaled to the financial community that no significant transaction was imminent.

However, Friday’s news of JP Morgan’s involvement as the financing bank was evidence that “the deal is real.” With the transaction now confirmed, EA will go private at $210 per share in cash, with PIF rolling over its ~10 percent stake. The deal is expected to close in EA’s fiscal Q1 2027. CEO Andrew Wilson will stay on as CEO.

It means that we’re looking at the second-largest transaction in the history of the video games industry. Moreover, unlike Microsoft’s $68.7 billion purchase of Activision Blizzard in 2023, the current deal highlights the dramatic evolution of the industry in just a few years. Video games, despite their assumed frivolity, are now a significant cultural industry. The deal, backed by state capital (PIF), private equity (Silver Lake), and political capital (Kushner’s Affinity Partners), underscores this transformation.

While traditional M&A focuses on synergies and market consolidation, this transaction represents something fundamentally different: the acquisition of cultural influence and soft power by sovereign wealth, marking gaming’s transition from a pure entertainment product to a strategic geopolitical asset.

A second reason for surprise among industry insiders is that the math doesn’t add up.

The $55 billion offer represents an approximate 20 percent premium over EA’s recent market value. With the firm generating approximately $2.8 billion in annual cash flow (EBITDA), the deal values EA at 19.6 times that figure.

In typical leveraged buyouts, acquirers borrow against the target’s cash flow at a rate of approximately four times EBITDA. Entertainment companies with breakout potential can command higher multiples. For instance, PIF’s acquisition of Scopely in 2023 reportedly generated 20 times cash flow. Additionally, Microsoft’s purchase of Activision Blizzard valued the company at a 21.5 times multiple ($68.7 billion for $3.2 billion in EBITDA), although that occurred in a much stronger market.

But neither EA’s mature business profile nor the current market environment appears to justify such lofty valuations.

EA’s publishing business relies heavily on sports titles, which generate roughly 70 percent of its earnings. Yet, this mature segment shows little growth potential, while the company’s lone live-service success, Apex Legends, has peaked without achieving the cultural permanence of its rivals, such as Fortnite. The firm’s near-term upside rests partly on Battlefield 6, a pivotal but high-risk catalyst that challenges the firm’s ability to compete with titles like Call of Duty. Its steadfast anchor remains the recurring revenue of Madden, EA Sports FC, and NHL.

More broadly, against the backdrop of softening consumer spending and an increasingly precarious global trade environment, EA’s competitive position has eroded. Even the pandemic-era expansion that once appeared to insulate the company from economic shifts is proving less effective than anticipated.

EA’s own guidance projects 5 to 7 percent annual revenue growth through 2027, well below the double-digit targets that might justify such valuations. Even assuming double the average leverage (8 times EBITDA), PIF would need to contribute roughly $30 billion in equity. Accounting for PIF’s existing 10 percent stake in EA reduces this to approximately $27 billion—a massive commitment for a company that faces such headwinds.

This raises the question:

What exactly is Saudi Arabia’s strategy?

The simple answer is that the country has a clear mandate to reduce its economic dependence on oil by investing in global growth sectors, particularly sports and entertainment. Games are an obvious avenue because they combine IP, global cultural influence, and long-term monetization potential.

The premium multiple here reflects EA’s fundamentals only in part. Most of it has to do with PIF’s consolidation logic: building an integrated portfolio that spans Scopely (including Niantic and Pokémon Go), Nintendo, Take-Two, and now EA. In this framing, EA is being valued less as a standalone company and more as a strategic asset in a broader strategy.

Saudi Arabia earmarked $38 billion to make Riyadh a gaming hub. The strategy also reflects strong domestic demand, with approximately 58 percent of Saudis playing games, roughly 21 million people, and the regional market projected to expand by 56 percent to $2.8 billion by 2026, according to Niko Partners. (Disclosure: I’m an advisor.)

In just a few years, it has refined this approach. Examining its various holdings, we observe a significant shift from even two years ago.

Between 2023 and 2025, Saudi Arabia’s PIF has focused its gaming investment strategy. Instead of spreading money across companies worldwide, it has expanded its positions in American gaming companies.

Savvy Gaming Games Group, its publishing subsidiary, nearly tripled in value from $7.4 billion to $18.5 billion, due to Scopely’s breakout success with titles like Monopoly Go! and a $3.5 billion acquisition of Niantic’s gaming division. Meanwhile, PIF’s position in publicly traded firms shrank from $13.1 billion to $10.5 billion after it sold its stakes in Asian gaming giants like Nintendo, NCSoft, and Nexon. By contrast, it held on to its shares in EA and Take-Two, which both roughly doubled in value.

Though its total games portfolio grew 41 percent to $29.1 billion, we find a clue in its geographic concentration: U.S.-based assets more than doubled to $25 billion, while non-U.S. holdings halved to $4 billion. Saudi Arabia is clearly betting that American gaming companies offer the best path to both financial returns and cultural influence.

Scopely plays a starring role here. Initially criticized as overvalued, its $4.9 billion acquisition of the mobile game maker has proven doubters wrong. The company has outperformed the market by spending significantly more than its competitors—Scopely’s co-CEO, Javier Ferreira, revealed that they spent over $1 billion marketing Monopoly Go! alone.

This suggests PIF’s strategy is straightforward: throw staggering amounts of money at establishing market dominance. Given the Saudi Arabian government’s virtually limitless resources, it’s actually a solid plan. Along these lines, Scopely’s success seems to have emboldened PIF to double down with even bigger bets.

Unsurprisingly, a firestorm of comments and speculation followed the announcement. At the center sits the irrational financial logic that tells you it’s about power, prestige, and staking Saudi Arabia’s claim in American entertainment. Understandably, people are worried about…

What a potential buyout means for Electronic Arts

An immediate effect of its privatization is that some breathing room has been created around the upcoming release of Battlefield 6. Initial impressions for the new shooter are promising, but given the performance of the rest of EA’s portfolio, Wall Street investors are watching the release closely. One could argue, as I have, that it’s an existential test.

If PIF is serious about leveraging EA as the crown jewel of its gaming strategy, it is likely to be indifferent to short-term profit margins. Saudi Arabia is seeking to foster engagement, providing EA with at least a temporary reprieve from its strict focus on profitability.

That may yet have its benefits for the publisher and its players. In an analysis from a few weeks ago, I demonstrated how privately held game companies outperform their publicly traded counterparts. Public companies tend to function as financial vehicles, optimizing for liquidity and quarterly earnings. Private companies, by contrast, can operate as true product businesses, focusing on creative vision and long-term value. For EA, this means it will be better insulated from market pressures as it becomes a spearhead of Saudi Vision 2030.

Nevertheless, the size of the EA empire and its heavy reliance on sports video games suggest there will be some degree of right-sizing, especially as a subset of its activity will likely be relocated to Saudi Arabia. That brings me to my predictions.

• The deal’s size and EA’s global footprint will trigger regulatory review in the U.S. and elsewhere. The acquisition will draw a CFIUS review, since handing a U.S. publisher and its player data to a foreign sovereign wealth fund raises both security and immigration oversight questions. However, the participation of US President Trump’s son-in-law, Jared Kushner, is likely to ensure that the deal gets approved. He’s made it clear that the US is for sale, and that includes Electronic Arts.

• EA will likely be divided into sports and everything else. Given that sports games dominate its portfolio and play a crucial role in Saudi Arabia’s sports and entertainment ambitions, splitting the company into focused divisions seems inevitable.

• Expect political fireworks. Already, skeptics view the buyout of an American entertainment firm by a country’s sovereign wealth fund and point to a weak human rights report card. Just last week, a slew of well-known standup comedians drew ire from colleagues and audiences for performing at the Riyadh Comedy Festival. That said, there are ample parallels with oligarchs buying up European soccer clubs.

In the weeks to come, we’ll undoubtedly learn more. Suffice to say, just as during the pandemic, the video games industry finds itself again at the center of one of the defining transactions in the global economy. How the proposed buyout plays out will tell us about the state of interactive entertainment and the emerging character of the new global economy.