Nice deal for Elevation Partners tonight with the media buyout firm’s first exit. Electronic Arts is buying portfolio company Bioware for $850m, which is a pretty spiffy sale for a gaming company.
Now, to be fair, it’s not a gangbuster exit for Elevation. The company that Roger “Mullet” McNamee built is doing about a 2x on the deal, which is nothing to sneeze at, but also is likely on the low end of the fund’s target returns.
The most interesting part, at least to me, was the people angle. Recall, then Elevation Partners partner John Riccitiello drove the Bioware/Pandemic acquisition back in November of 2005. Mssr Riccitiello left Elevation for Electronic Arts CEO job in February of this year, only to end up buying his former portfolio company Bioware/Pandemic from his friends at Elevation.
Got all that? Nothing like friends buying friends from friends, which is one reason why the Valley works, and most other would-be Valleys don’t. It’s not enough to have great technology, capital, and smart people; you also have to friends buying from friends. Seriously.
Anyway, Riccitiello did some pretzel-ish twists to avoid the appearance of conflict of interest on the deal, and it’s debatable whether he ever truly could. Here’s the WSJ on the subject:
To avoid the appearance of a conflict of interest, EA said Mr. Riccitiello recused himself from negotiating financial terms of EA’s acquisition of VG and abstained from the EA board’s vote on the transaction, though company executives said Mr. Riccitiello endorsed the deal. Based on his continued financial interest in Elevation, Mr. Riccitiello could see a personal benefit of as much as $4.9 million from the deal, depending on how Elevation’s investments perform over time, EA said in a regulatory filing.
You can read the filing here. Scroll down to item 1.01 for the fun stuff.