Gearbox CEO Reveals Why He Sold The Borderlands Studio For $1.3 Billion

Randy Pitchford opens up on why he decided to sell after saying no so many times over the years.


Seemingly out of nowhere, it was announced this week that Borderlands studio Gearbox, which had been independently operated since its founding 21 years ago, had sold the company to Sweden's Embracer Group for up to $1.3 billion. Gearbox CEO and founder Randy Pitchford has now shed some light on why he made the deal and why he believes it's in the best interest of the company going forward.

Speaking to VentureBeat, Pitchford said selling his company never entered his mind in a serious way before this. "I've always been allergic to the concept of [mergers and acquisitions]," he said. He said "every single partner company" that Gearbox had worked with over the years had suggested the possibility of a buyout to Gearbox--either through hints or an overt offering--but Pitchford always said no.

"Many companies we've never worked with would hit us with a cold call, an unsolicited proposal. I've always been allergic to that," Pitchford said.

Pitchford was cautious about the earlier buyout proposals because a typical acquisition means the acquired company will be "centralized" into its parent company. "It's more of a constrictive approach. It assumes that we can't make our own way, that we don't know how to win with what we're experts at," he said.

But with Embracer Group, Gearbox was offered the ability to remain decentralized from the corporate structure. He said he was told by Embracer's Lars Wingefors that, "'We need to do the opposite of control. We need to fuel them. Let's see how fast and far entrepreneurial groups like Gearbox and the other members of the Embracer Group can run if they're empowered instead of held back,'" Pitchford said.

Pitchford said he didn't realize that this type of arrangement could even exist.

"When I realized what Lars had built, what he was doing, and what the strategy was, it is simple and obvious, yet it's completely counterintuitive to the way the rest of the industry works," he said. "I realized that Lars isn't the suit that I've been navigating around. Lars is me, just coming at it from the access to capital point of view. I come at it from building the product."

Also in the interview, Pitchford said Gearbox was an attractive acquisition target because the studio and its games never lose money. Not all of Gearbox's games have been home runs--Battleborn, for example, was just shut down--but the company has been profitable every year since 1999, Pitchford said.

"We've never lost money. To us, that part of it--I feel like Neo in the Matrix after he sees it. I just need more capital so we can do this faster and better," he said.

Pitchford owns the majority of Gearbox, so he stands to make a lot of money from the sale, but he also structured the studio in a unique way. Pitchford owns 70% of Gearbox, while the employees own the remaining 30%. This setup, along with what Pitchford called the "most generous royalty bonus program in the history of the industry" for his employees, is why people like to work at Gearbox and stick around.

"That's created alignment between every single person that participates in the profitability of our products," he said.

Gearbox's deal with Embracer is structured in such a way that Gearbox could make even more money down the road if it hits certain performance milestones.

Despite the sale, Gearbox will continue to work with 2K Games on the Borderlands series, though no new titles in the franchise have been announced.

Pitchford also recently revealed that the studio is also incubating several new game ideas that he believes could shake up the video game industry like Borderlands did.

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