Embracer CEO says restructuring is over, no other studios for sale

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Original story, April 2 2024: Lars Wingefors, the CEO of Embracer Group, has declared an end to the group's lengthy restructuring process that resulted in the loss of 1,400 jobs and the closure of three studios.

In an investor call following last week's $460m sale of Borderlands developer Gearbox, Wingefors told investors: "Now we are ending the restructuring program [at the] end of March and we're now looking into the future."

He added that the divestment of Saber Interactive and Gearbox were "two very important milestones" in this process.

Rock Paper Shotgun reported that he also said Embracer was not planning to sell any more of its businesses.

"We are getting approached... on a weekly basis by companies that would like to acquire certain assets within the group," Wingefors told investors. "And 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."

It is not clear whether this means an end to the layoffs that have hit Embracer over the past year. GamesIndustry.biz has reached out for comment and clarification.

When asked about the Gearbox sale, Wingefors emphasised that any divestments have been based on negative cash flow for the Embracer Group rather than a sign of faith in the developers themselves.

"It's important to understand why we acquired Gearbox and what the plan [was] when we acquired Gearbox," he said. "Gearbox is one of the best developers in the world, but they had ambitions to entertain the world and grow their business significantly, both by publishing other game titles as well as creating more titles on their own. That was a very ambitious growth business plan over the coming six years we agreed into. They were in the middle of that, which meant we had a significant growth CapEx [capital expenditure], which created a negative cash flow.

"It also added a lot of business risk into the pipeline, because yes they had a lot of good success with Borderlands but obviously we had a number of titles that had not been released yet and not been proven yet. Now in the current environment, we decided this is the best outcome because we needed to reduce our CapEx significantly and reduce our business risk. We're not making this deal because we're unhappy with the development team of Gearbox, but in this current environment this is absolutely the right decision for us to take."

He reiterated that Take-Two Interactive reaped most of the benefits from Borderlands since it held the publishing rights to Gearbox's franchise, and that the economic upside of the studio's future pipeline for Embracer was "fairly limited."

Going forward, Wingefors said Embracer "would like to focus around IPs and projects where we capture most of the economic upside when we deploy capital and our most valuable assets, meaning our games developers."

Finally, Rock Paper Shotgun reported that Wingefors dismissed the idea that Embracer would resume its aggressive M&A strategy any time soon.

"I think it's way too early to start talking about restarting the M&A engines again," he 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 utilise our assets we have within the group, and have them work together, and how we leverage them better working together, utilising different functions, I think that’s our focus right now, to increase profitability and cashflow generation, by simply making better products and games."

Embracer Group began its restructuring program in June 2023 following the collapse of a deal that would have been worth at least $2 billion.

During that time, it has laid off more than 1,400 staff with hundreds more departing the company as part of the Saber and Gearbox sales. It also closed Saints Row developer Volition Games, reformed TimeSplitters team Free Radical Design, and Campfire Cabal.

That leaves the group with 111 internal games development studios, plus dozens more businesses across other operating groups such as tabletop specialist Asmodee and comics publisher Dark Horse. In total, its remaining headcount is over 12,000.

For a reminder of which companies are still within the Embracer Group, check out this recent edition of This Week In Business.

Update, April 3 2024: An Embracer spokesperson to our query regarding further layoffs.

"Our commitment to continuously evaluate options to make us more successful as a company remains," they said. "Further, we will come back and summarize the program no later than in connection with the Q4 report on May 23."