Mitch and Blake explore the role of consolidation -- primarily through mergers and acquistions -- in building some of the biggest and most durable companies in gaming.

They begin with a discussion of the four major strategic uses of mergers and acquisitions: economies of scale, entry into new markets, control of talent and intellectual property, and new technologies. They provide many examples along the way.

Mitch argues that M&A is so important to the business that it's actually difficult to avoid ending up on either side of that equation, as an acquirer or as a target of aquisition. Mitch and Blake map that idea onto their dictum that venture backed companies need to decide whether they are building a product or a company.

They talk briefly about the financial engineering side of M&A, particularly in the form of the "roll-up" -- where companies are entirely build from acquisitions with a (usually mistaken) hope that the value of the whole will exceed the sum of the parts. They discuss why this rarely works, and try to explain why Embracer is in such trouble as a result.

They close the episode with a closer look at EA, Activision, Sony, Microsoft and other companies and show how their acquisitions map clearly onto the four main consolidation strategies. They argue that leverage is the key component of M&A success -- that buying companies against some pre-existing competitive advantage (rather than just buying randomly) results in a much higher likelihood of success.

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