Ken Burnside on how screwed Asmodee is

[billd91]

On his Facebook page, Ken Burnside has this to say about Asmodee’s situation:

I seem to be the only former financial journalist who knows game publishing.
In 2019, the owners of Asmodee NA had $410 million in debt on the books, and they let their exclusive deal with Alliance Distribution expire. The various divisions of Asmodee were all profitable to some extent or another, but not massively so.
The owners of Asmodee NA had experience in game publishing (Asmodee was a big European game publisher for 30-ish years),
The "merger and acquisitions" phase of Asmodee NA came from very low interest rates in the US, and the thought was that bringing all these studios into one company would let them find new efficiencies in boardgame publishing.
Which, to be fair, they tried really hard at. It also got them FFG with some major licensed IPs, like Star Wars and Game of Thrones; remember, Thrones was still on HBO then and hadn't gotten to the horrible last two seasons.
The original owners of Asmodee wanted to retire, and sold the company to Eurazeo in 2014; Eurazeo had, until then, been a company that made money off of rental parking lots. The selling price was $143 million. Eurazeo continued some of the acquisitions, but slowed down a bit on this front.
In 2018, Asmodee, nee Eurazeo, sold itself to a French private equity form called PAI Partners, for $1,200 million. In this time frame, their exclusive distribution rights with Alliance were up for renewal and weren't.
PAI Partners, as the owners of Asmodee, looked at what they had with Asmodee, and started looking for a buyer in late 2019. Then 2020 happened. (The first shutdowns for COVID started the Friday that GAMA Expo ended...). COVID shook everything up (understatement).
To make themselves more appealing to potential buyers, Asmodee cut expenses. By not reprinting products. Like a Star Wars RPG. And several other high profile products. Some of this was to have cash on hand to buy down their worst tranche of debt, some of it was to cut "above the line" expenses, and some of it was to tempt a buyer into buying them to get a bunch of products with pent-up demand, the "slingshot payback" strategy sometimes works.
It took 2.5 years for them to get bought by Embracer; they sold to Embracer for $2,750 million. They spun off both creative teams for Star Wars product lines to separate companies under contract to keep those product lines from dying completely. Which complicated Embracer's ability to monetize them.
Meanwhile, Embracer was, well, embracing comic book publishing, small film productions, computer game publishing and getting all the film rights to Lord of the Rings from the Tolkein estate.
Embracer did so by running up a lot of debt. Much like Asmodee NA had done buying up game studios. Unlike Asmodee NA, they had a PLAN.
Which was a carefully negotiated $2,100 million dollar investment from the Saudi Sovereign Fund.
Which fell through in November of last year. They immediately shed 10% of the headcount in Embracer ("reducing redundant positions") which barely touched what used to be Asmodee NA, because it turns out most boardgame publishers don't have redundant employees, because everyone's doing four jobs while mopping the floor by holding the handle with their teeth.
However, Embracer had a mountain of debt from the acquisition of Asmodee, had been selling off things on the computer game side for ready cash while waiting for the Saudi deal to happen...
And then it didn't. And now, Embracer has taken nearly all of the debt from their video game acquisition spree, and all of the debt from the comic book and film production businesses, loaded them on Asmodee, and said "Good luck, kid! Write when you find work!"
Asmodee made $78 million in profits in 2023; including those profits, they have about $180 million in "liquid assets."
They now have $1,150 million in debts. Having that much debt means it's almost impossible for them to raise additional investor money through the stock markets; the numbers make no sense.
Those debts are due in December of 2025. Some are due at the end of October of 2025.
If they can squeeze enough cashflow out of 2024 and the first half of 2025, they can get that debt refinanced (basically, take out new loans to pay off the old loans and buy themselves some more time, at the expense of a little bit more interest.)
However, right now the company's survival is entirely dependant on keeping their lenders happy. Their lenders are going to be asking where the sales growth and revenue growth are coming from. Their lenders are going to be worried about interest rate hikes, and...yeah.
Do you have faith that investment bankers understand game publishing? I don't.
I expect that Asmodee is going to try, and then people are going to buy studios from them, with those cash influxes used to pay down that horrifying debt load.

So, things aren’t looking good…

(Facebook post quoted because try pasting a functional Facebook link here…good luck)

 

[Retreater]

I'm trying to get an idea of how big Asmodee is and what games will be affected. I'm scanning through Wikipedia pages and clicking links of their different subsidiaries, and this is what I'm putting together...

This is essentially the biggest of the popular "nerdy" board game companies. It's not stuff like Monopoly, but basically every boardgame that is popular enough to be in Target and also with crossover appeal to actual gamers - Catan, Pandemic, Ticket to Ride, etc.

Without hyperbole, it's basically safe to say that if Asmodee goes under, that's the end of the era of mass appeal boardgames.

 

[Pedantic]

Oh they have plenty of hobbyist studios under their thumb as well. Z-man, FFG, Lillebud, Repos, and they also provided North American distribution for a lot of overseas publishers they didn't directly own.

We're talking extinction level event for a lot of beloved hobbyist titles that are counted as staples. If they go down, a lot of popular games will suddenly become hard to find.... Probably wise to purchase any older titles or expansions you're interested in now.

Edit: oh my goodness, and I forgot Days of Wonder!

 

[Baron Opal II]

Wow.

On his Facebook page, Ken Burnside has this to say about Asmodee’s situation:
"...Embracer did so by running up a lot of debt. Much like Asmodee NA had done buying up game studios. Unlike Asmodee NA, they had a PLAN.
Which was a carefully negotiated $2,100 million dollar investment from the Saudi Sovereign Fund."

As in $2.1 billion? That's a lot of debt, investment, whatever to handle.
And the game company received all of the debt when that deal fell through?
It amazes me that it's legal to move debt around like that, but I'm not in that field.

I'll have to check the LFGS to see if there are Asmodee published games that I particularly want that I'm missing. Reprints probably aren't happening anytime soon.

 

[payn]

 

[John Dallman]

The original owners of Asmodee wanted to retire, and sold the company to Eurazeo in 2014 ... The selling price was $143 million.
In 2018, Asmodee, nee Eurazeo, sold itself to a French private equity form called PAI Partners, for $1,200 million.
PAI Partners, as the owners of Asmodee, looked at what they had with Asmodee, and started looking for a buyer in late 2019. Then 2020 happened. It took 2.5 years for them to get bought by Embracer; they sold to Embracer for $2,750 million.

So the original owners sold it for something like what it was worth. Then the new owners managed to sell it for far more, and the next set of owners did the same. Looks like the value of the business has been wildly inflated by people who think "private equity" means "we can print money" and the final set of owners are trying to get blood out of stones.

 

[pawsplay]

If I'm understanding correctly, the best hope for a lot of your favorite games is going to be that, at the other end of the tunnel, someone picks them up in a fire sale and puts them back on the market.

 

[pawsplay]

So the original owners sold it for something like what it was worth. Then the new owners managed to sell it for far more, and the next set of owners did the same. Looks like the value of the business has been wildly inflated by people who think "private equity" means "we can print money" and the final set of owners are trying to get blood out of stones.

The greater fool.

 

[Zaukrie]

Wait, a private equity group bought a company, stripped it of cash, and left them to rot? Shocker!

 

[DragonLancer]

If this has a knock on effect to the European branch we over the pond are going to get stuffed. I think Asmodee are the only big name in hobby gaming distribution over here.