At this point, there are a lot of questions to be asked, which probably don't have public answers. Since a private equity firm like Elevation usually recoups its investment via an IPO or the sale of a company, and Wall Street is clearly uncomfortable with public offerings from independent developers, particularly those with high creative standards and long development cycles, why invest in VG Holdings if the plan wasn't to sell the company from the start? How soon did Riccitiello know succession was being considered at EA? If BioWare and Pandemic went into this deal with the desire to receive funding to remain independent, was the lure of an eventual IPO the carrot on a stick that lured down the path to eventual buyout? And, perhaps most importantly, when taking the reins as CEO of VG Holdings, with the promise of merely handling the mundane business operations, did Riccitiello know he was on the short list for taking over the reins at Electronic Arts? In short, were BioWare and Pandemic always intended to be fattened and sold on the market, and did the executives who handed the reigns over to Elevation and Riccitiello know?
There's a lot of room here for conspiracy theory, but it depends on the executives at BioWare and Pandemic being duped and that Riccitiello left EA with plans from the start to land the "big one." It is equally conceivable to suggest that BioWare and Pandemic were simply interested in securing creative freedom and were convinced that by taking the investment from Elevation Partners and putting Riccitiello, clearly a savvy and respected executive, in charge of their business operations they could achieve that Holy Grail. Also conceivable is that things just fell into place for Riccitiello, that on being recalled to EA as its CEO with Probst as Chairman of the Board, he was in a unique position of authority and influence to land two of the strongest names in game development for the publisher. The problem is both of these theories also require the assumption that everyone in the deal assumed Elevation would make its money back on an eventual public offering from VG Holdings, which was widely seen in financial sectors as unlikely.
Regardless of the motivations and intentions that might have led to the deal, the endgame played out with Riccitiello returning as CEO of Electronic Arts in February of this year, relinquishing his roles as Managing Director of Elevation Partners and CEO of VG Holdings. In his wake, Greg Richardson, himself a former Electronic Arts general manager, was named to the new CEO position at VG Holdings. The $860 million dollar deal would be the biggest in Electronic Arts' history.
Riccitiello did recuse himself from the buyout vote, though he highly endorsed it, and in a filing with the Securities and Exchange Commission, Electronic Arts quickly disclosed that their new CEO stood to individually make $4.9 million on the deal. The deal itself was cash rich, with $620 million in cash going to the stockholders of VG Holdings. While the specifics of that part of the deal will remain private, the bulk of that cash likely goes back to Elevation Partners. $155 million of time-restricted equity will be paid out to the management of BioWare and Pandemic, an effort to compensate and retain key talent.
