1. E LECTRONIC A RTS, I NC. P OTENTIAL M ERGERS & A CQUISITIONS M&A committee: Kaitlyn Emerick, Jasmine Fortune, Claire Lin, Patti Mansbach, Helen Tse

2. EA Potential Targets Akamai Jasmine Fortune Ubisoft Patti Mansbach Take Two Helen Tse Zynga Claire Lin Electronic Arts- Acquirer Kaitlyn Emerick

3. Online and mobile is where the gaming industry is headed 2 2 1 1

4. EA Transition to Online and Mobile Games ●Traditional gaming company: Microsoft’s Xbox, Sony’s PlayStation, and Nintendo Wii ●Popular games: Madden NFL Series, Battlefield, Titanfall and The Sims ●Acquired PopCap games in 2011 for $750M ○Big break into mobile and online gaming ○Market cap before: $8 billion ○Current market cap: $9 billion

5. EA Healthy Past Operating Cash Flows 2010201120122013 $152M$320M$277M$324M

6. EA Cost of Capital Weighted Average Cost of Capital15% Cost of New Long-Term Debt5% Weight of Long-Term Debt 10% Shareholders’ Required Rate of Return18%

7. EA Increasing Free Cash Flow 20142015201620172018 $506M$308M$334M$386M$453M Terminal Value$13B $13.5B Critical Assumptions 20132014-2018 Sales Growth-8%18% Costs of Goods as % of Sales37%33% R&D as a % of Sales30%31%

8. EA is Fairly Valued Estimated Value per share$28 Current Market Price as of 4/24/2014$28 Current Market Capitalization$9B ●EA stock will not be used to acquire companies

9. EA Acquisition Budget EA Budget Cash$1B Free Cash Flow $228M New Debt$700M Total Budget$2B Debt Capacity Current debt: $633M in convertible bonds due in 2016 with conversion price of $31.74

10. EA Potential Mergers & Acquisitions Akamai Jasmine Fortune Ubisoft Patti Mansbach Take Two Helen Tse Zynga Claire Lin

11. Akamai Technologies, Inc. ● Leading Provider in cloud services ○Superior delivery ○Optimization ○Security content online ●Serves a wide range of customers

12. Akamai Alta 2.0 May Create $4.4 M ●Alta 2.0: an updated version of web accelerator solution ●Initial cost: $1.2M ○Net present value: $4.4M ○Payback period: < 1 year Critical AssumptionsForecasted 2014 Number of solutions sold1,300 Sales growth5% Price per solution$600,000

13. Akamai Healthy Past Operating Cash Flows 2010201120122013 $402M$444M$530M$565M

14. Akamai’s Cost of Capital Weighted Average Cost of Capital20% Cost of New Long-Term Debt4% Weight of Long-Term Debt 10% Shareholders’ Required Rate of Return24%

15. Akamai Increasing Free Cash Flow 20142015201620172018 $665 M$913 M$1.6 B$2.1 B$2.9 B Terminal Value$12.6B $15.5 B Critical Assumptions 20132014-2018 Sales Growth15%22% Property as % of sales29%31%

16. Akamai Stock is fairly valued Estimated Value per share $53 Current Market Price as of 4/24/2014 $53 Current Market Capitalization $9.6B Shares Outstanding179M Premium 20%$63 Purchase Price$11.3B

17. Akamai will not be acquired ●EA cannot afford Akamai at this time ●Akamai’s estimated share price is too high

18. Ubisoft is in the European Market ● Based in Paris, France. ●129 offices worldwide. ●Largest is in Montreal, Canada. ●Acquiring Ubisoft could increase cash flows in the European market for EA.

19. Ubisoft Will Be a Successful Cross-Border Acquisition ●Only 17% of cross-border mergers and acquisitions create shareholder value. ●EA will create incentives for the key people at Ubisoft to stay.

20. Ubisoft Voice Over IP May Create €8 M ●Implement a voice over IP system for international phone calls. ○Initial cost: €1.5M ○Net present value: €8M ○Payback period: <1 year Critical AssumptionsForecasted 2014 Euro Per Dollar Rate€0.75/$ Hours Spend on the Phone Per Employee Per Year 130 Telecom Company Cost Per Minute €0.09

21. Ubisoft Healthy Past Operating Cash Flows 2010201120122013 €241M€392M€358M€400M

22. Ubisoft Cost of Capital Weighted Average Cost of Capital19% Cost of New Long-Term Debt5% Weight of Long-Term Debt 15% Shareholders’ Required Rate of Return20%

23. Ubisoft Increasing Free Cash Flow 20142015201620172018 €484M€627M€800M€1B€1.2B Terminal Value€6.7B €8B Critical Assumptions 20132014-2018 Sales Growth18%25% Costs of Goods as % of Sales27% R&D as a % of Sales35%37%

24. Ubisoft is Undervalued Estimated Value per share €18 Current Market Price as of 4/24/2014 €13 Current Market Capitalization €1.35B ($1.8B) Shares Outstanding96M Premium 20%€15 Purchase Price€1.5B ($2B)

25. Ubisoft could be bought at a later time ●Ubisoft is not in the online and mobile industry. ●Just because we can afford to acquire them, does not mean we should. ●Should invest in online and mobile before we expand internationally.

26. Take Two Interactive Software Inc ●Leading developer, marketer, publisher of video game products ○Grand Theft Auto (GTA) ○BioShock Infinite ○NBA 2k14

27. Take Two GTA VI May Create $871 M ●Create Grand Theft Auto VI ○Initial cost: $8.2M ○Net present value: $871M ○Payback period: < 1 year Critical AssumptionsForecasted 2016 Units Sold40M Quality & Assessment$1.3M Marketing/Promotions$535,000

28. Take Two Improving Past Operating Cash Flows 2010201120122013 $(136)M$135M$(85)M$(5)M

29. Take Two Cost of Capital Weighted Average Cost of Capital16% Cost of New Long-Term Debt5% Weight of Long-Term Debt 10% Shareholders’ Required Rate of Return17%

30. Take Two Optimistic Free Cash Flow 20142015201620172018 $177M$42M$150M$192M$422M Terminal Value$2.6B $3B Critical Assumptions 20132014-2018 Sales Growth49%50% Costs of Goods as % of Sales59%55% R&D as a % of Sales6%8%

31. Take Two is Fairly Valued Estimated Value per share $20 Current Market Price as of 4/24/2014 $22 Current Market Capitalization $1.7B Shares Outstanding86M Premium 20%$24 Purchase Price$2.1B

32. Take Two will not be acquired ● Uncertainty to Take Two’s very optimistic free cash flows ●EA cannot afford Take Two at this time ●EA focusing on online and mobile sector

33. Zynga, Inc. ● Develops,operates, and distributes online social games. ○Farmville ○Chefville ●Possible acquisition because it is in the online and mobile market.

34. Zynga New Social Game App Will Create $18 M ●Launch new social game app ○Initial cost: $5.5M ○Net present value: $18 M ○Payback period: < 1 year Critical AssumptionsForecasted 2015 New active users11M % of users that make in- app purchase 35%

35. Zynga Positive Past Operating Cash Flows 2010201120122013 $326M$389M$196M$29M

36. Zynga Cost of Capital Weighted Average Cost of Capital17% Cost of New Long-Term Debt5% Weight of Long-Term Debt 20% Shareholders’ Required Rate of Return20%

37. Zynga Positive Free Cash Flows 20142015201620172018 $82M$45M$121M$243M$405M Terminal Value $4B $4.4B Critical Assumptions 20132014-2018 Sales Growth12%25% Expenses as % of Sales28%21% R&D as a % of Sales47%42%

38. Zynga is Overvalued Estimated Value per share $2.28 Current Market Price as of 4/24/2014 $4.35 Current Market Capitalization $3.7B Shares Outstanding832M Premium 20%$5.22 Purchase Price$4B

39. Zynga Could Merge With EA Why? ●EA does not have enough money to acquire Zynga ●Zynga is overvalued Benefits: ●Increase market cap and company value ●Align to EA’s business model ●Only implementation cost

40. No Acquisitions Will Be Made at This Time CompanyRecommendation Akamai Will not acquire because it is too expensive. Ubisoft Future potential target for international business. Take Two Will not acquire. Firm not in mobile industry or international. Zynga Will not acquire because it is too expensive. Possible merger in the future.

41. Moving Forward ●Our recommendation is to acquire small privately held companies because they are more affordable and will be easier to integrate into Electronic Arts.

42. Merger Success IT can be a powerful factor behind M&A success 2 key points that ensure back-end integration ●Have its own IT in the best shape before initiating any deals ●As companies begin merger talks, IT leaders should be involved as well

43. Principled Leadership ●Communicate regularly ○Integrated culture ○Create positive business momentum and discipline ●Get staff involved ○Create trust and purpose in the community ○Allows employees to remain focused and engaged on the job

44. No Acquisitions Will Be Made at This Time CompanyRecommendation Akamai Will not acquire because it is too expensive. Ubisoft Future potential target for international business. Take Two Will not acquire. Firm not in mobile industry or international. Zynga Will not acquire because it is too expensive. Possible merger in the future.