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Conclusion
The Eidos story is one of remarkable vicissitudes. Like so much of its history, Eidos' final
chapter is proving both dramatic and controversial. Having enjoyed a roller-coaster financial performance since its move into the games industry in 1995, Eidos looked set to disappear with a whimper, bought for just
£70m, a fraction not just of its worth during the dotcom boom days but also of its worth just 12 months earlier. An overweight cost-base, some dreadful production management and, ultimately, the release of too
many shoddy products resulted in a string of profits warnings at a time when most other publishers had reported record growth. Many smaller publishers without the franchise portfolio, cash resources or distribution
reach of Eidos have not only survived during this time but have even thrived (e.g. SCi, Majesco and Hip Interactive). It seems ironic, therefore, that the Eidos board had often blamed market conditions for its
performance failings.
SCi is understood to have spent several months in due diligence, exploring the integration risks, long-term potential and assessing the inherent value of Eidos. Despite this, the Elevation
Partners offer was made with just 2% of the shareholders' (the board's collective holding) support, a number that has never risen. It was almost as if they either did not expect another offer or did not believe the
SCi offer would be credible to shareholders. Such complacency (or was it remarkably ineffective advisors?) has resulted in a one-horse race that, for some reason, has surprised both the Eidos management as well as
Elevation Partners, both of whom have made vain attempts to undermine the SCi bid's momentum.
SCi will gain control of Eidos, that much is certain, but the SCi management are faced with the unenviable task of
restructuring Eidos as well as motivating and managing the surviving staff. Whether they can return the company to the level of profitability it (sporadically) enjoyed in its heyday remains to be seen. Within the
UK, the SCi board should be considered the most suitable to face such a challenge even if they do not have large company experience. Questions, however, will also remain over the actions of the Eidos board in the
run up to and management of the acquisition offers. Was the Elevation Partners deal actually a management buy-out in disguise as many observers think? Why did it take so long for the board to endorse the SCi deal
and why did they irrevocably back the Elevation Partners deal when they must have known the SCi offer was forthcoming (and with it the commitment from Eidos' largest shareholder)? How did the the Company manage to
burn so much cash during the last 12 months? Why were the launches of the next iterations of Hitman and Tomb Raider delayed at a time when Eidos desperately needed cash? Most contentiously, one might speculate as to
whether the Eidos board deliberately employed tactics to drive the share price down, thus making the Elevation Partners offer more palatable. Perhaps some of these will be answered once SCi take the reins.
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