Square and Eidos: The History

By the time the Tomb Raider franchise stumbled in 2003, however, Eidos' teflon coating was badly tarnished. The following year brought a further sucker punch, as long-time Championship Manager developer Sports Interactive parted company with the publisher - taking with them the source code to the game, but leaving Eidos with the brand name. Despite Eidos' seeming faith that it was the brand, not the game, that was important, Sports Interactive's departure proved disastrous for Championship Manager. The developer easily brought most of the fanbase with it to its new franchise, the SEGA-published Football Manager, leaving Eidos facing the downfall of a second cornerstone brand in the space of only two years.

A publisher is only as good as its stable of titles and IP - and that IP is only as good as the publisher's ability to manage it. Eidos' problems stemmed from many factors, but it's tough to argue that fundamental mismanagement of IP wasn't a root cause. In the case of Tomb Raider, development was badly managed; in the case of Championship Manager, a developer relationship was clearly mismanaged. Sports Interactive has never publicly spoken of problems in its relationship with Eidos, but the reality is that developers don't jump ship, leaving behind brands they've been building for a decade, just for a change of scenery.

By mid-2004, portfolio problems had turned into financial problems. Rumours of potential suitors in an acquisition deal began to fly as the firm's cash reserves dwindled and its losses mounted. Over the coming year, several names would pop up as possible buyers - both within the industry (EA, in particular, was repeatedly connected to the company) and outside (Time Warner, Viacom and News Corporation were all said to be in talks at one point or another). It wasn't until March 2005, however, that a genuine suitor was revealed - investment group Elevation Partners, headed by former EA COO John Riccitiello, which made a firm offer for the company.

This is where the standard tale of a corporate rise and fall turns into a bizarre soap opera. A day after Elevation's offer went public, another offer appeared - this time from SCi Entertainment, a much smaller British publisher which had enjoyed a measure of success thanks to the controversial Carmageddon series and, more recently, the Conflict: Desert Storm titles from now-defunct studio Pivotal Games. SCi offered marginally more for Eidos, planning to fund the takeover with a stock offer. Elevation Partners dismissed the SCi bid out of hand, and everyone - including Eidos' directors - expected the shareholders to do likewise.

They didn't. Opinions and stories differ as to why not. Some would tell you that shareholders were simply more confident in the ability of SCi's management to trim the fat from Eidos and return it to profit. Perhaps more likely, however, is the view the some shareholders, having seen the value of their stakes in the company collapse, simply didn't want to see Eidos' failed management get rich from the Elevation buy-out, preferring the vastly more frugal settlements they would get from SCi. Either way, a month later, Elevation dropped out of the bidding.

SCi finalised their takeover in May 2005, with senior managers joyfully describing it as the deal of the century, and business journalists struggling to fit as many metaphors involving minnows swallowing sharks into their stories as possible. Most of the former Eidos management was promptly defenestrated, with the newly-installed SCi bosses making it clear that they were aiming to craft a leaner, tighter publisher - focusing on ensuring that the imminent relaunch of core franchises would be as high-quality as possible.

Some things worked. The reappearance of Tomb Raider, as noted, was generally considered a success, achieving in both the critical and commercial fields, although not exactly setting the world on fire all the same. Other things, however, didn't. Eidos' ability to generate strong new franchise IP had seemingly stagnated, and nothing SCi did kickstarted it. Worse, the product slippages which had dogged the publisher were getting worse, not better.

By late 2007, Eidos was talking openly about buyouts again. This time, the suitor seemed relatively obvious - media giant Time Warner, through its Warner Bros subsidiary, had picked up 10 per cent of the company in late 2006, and would subsequently increase its stake on a number of occasions. Other companies were said to be hovering - including EA, whose new CEO, John Riccitiello, had led Elevation Partners' rebuffed attempt to buy Eidos in 2005. EA's interest was thought to have been sparked largely by a desire to prevent Eidos from being sold to a major outside player such as Warner or Disney - the company having previously taken a large shareholding in rival Ubisoft for similar reasons.

All the talk of mergers took a blow, however, in early 2008 - when the firm announced that talks had been halted. Furious shareholders, sick of seeing delays to key titles and annoyed that the hoped-for acquisition had failed to materialise, demanded the resignation of top executives. Within a week, the former SCi bosses who had taken over Eidos - including CEO Jane Cavanagh, publishing boss Bill Ennis and development boss Rob Murphy - were gone.

CFO Phil Rogers, having joined only in March 2007, took over as chief executive, initiating restructuring plans which contributed to a gigantic GBP 100 million loss for FY2008. Rumours of acquisition deals being discussed, however, didn't dissipate with the departure of the SCi executives - and were only slowed slightly by the advent of the credit crunch, with all of its implications for corporate mergers and acquisitions.

Indeed, many observers viewed Phil Rogers' job as being straightforward - he needed to take whatever measures were necessary to sell the company. As such, it was hardly a surprise when a buyout was announced in February of this year, with shareholders enthusiastically endorsing the long-awaited deal. It was, however, a huge surprise when the bidder was revealed to be Square Enix.