Recently, some major mergers and acquisitions (M&A) news has had some influence on the price performance of Take-Two Interactive Software (TTWO +0.23%). I'm talking, of course, about Electronic Arts' (EA +0.11%) announced plans to go private, in a $55 billion leveraged buyout transaction.
However, Take-Two has since given back much of these gains, for a good reason. A closer look at the EA deal shows it's hard to see how this deal could be the prelude for further video game industry consolidation.
NASDAQ: TTWO
Key Data Points
Still, make no mistake. While Take-Two may not have strong buyout potential, there's an actual strong catalyst at play with this name.
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Take-Two's short-lived reaction to the EA "go private" offer
On Sept. 26, 2025, The Wall Street Journal reported that video gaming giant Electronic Arts was going private, in what the publication called the "largest leveraged buyout ever."
On Sept. 29, EA confirmed the rumors. It announced that the buyout group, which included private equity firms Silver Lake and Affinity Partners, and Private Investment Fund (PIF), Saudi Arabia's sovereign wealth fund, would take the company private at $210 per share. That's a 25% premium to what the stock traded for just prior to when "go private" rumors emerged.
As often happens following M&A news, shares in competitors rose on the report. Take-Two Interactive Software was no exception. This stock rallied by 4.49%, from around $245 to $256 per share, when the WSJ scoop hit the street. It then climbed another 1.5%, to nearly $260 per share, following EA's confirmation of the offer .
Soon after that, though, Take-Two began to give back these gains. While it's not certain, it's likely that the market came to the same conclusion: This deal isn't a sign of further merger enthusiasm in the video game industry.
A stronger reason to buy than takeover potential
The EA deal may be setting a new record for leveraged buyouts, but that's not the only reason why this deal stands out. First, unlike most LBOs, which are primarily financed with debt, this deal's backers are funding it mainly with equity.
Second, it's possible that PIF's investment has to do with Saudi Arabia's efforts to diversify its economy. The motivation may not be strictly investment return-related, similar to how PIF's continued investment into Lucid Motors has had a lot to do with Saudi Arabia's desire to make itself a Mideast hub for EV production.
The key takeaway here is that industry consolidation is not a key driver of this deal, such as with Microsoft's 2023 purchase of Activision Blizzard. Hence, it is highly questionable whether Take-Two is a takeover target at this time.
Still, there may be an even better reason to buy this stock right now. It all has to do with its pipeline of upcoming video game releases. Between next year's launch of Grand Theft Auto VI, and plans to develop a college basketball-themed game to complement its NBA 2K franchise, Take-Two may be poised to meet, or even beat, analyst expectations.
Much room to run on improved profitability
Take-Two Interactive Software appears pricey compared to current results. At present, the stock trades for over 100 times forward earnings, well above the valuation of peers, including EA. However, next fiscal year, Take-Two's forward valuation could become far more reasonable. Taking into account the upcoming releases, analysts estimate that Take-Two could generate around $9.2 billion in revenue and earnings of as much as $9.96 per share. If achieved, this would represent year-over-year revenue and earnings growth of nearly 50% and 300%, respectively.
With this, the stock is effectively trading for just over 25 times next fiscal year's estimated earnings. Better yet, if GTA VI sales remain strong for several years, and the 2K college basketball game proves to be a blockbuster, shares may be in for further earnings growth and price appreciation.
Who knows? There may be M&A potential, but with Take-Two as an acquirer, scooping up smaller competitors, resulting in further cost and growth synergies. The EA deal may have brought Take-Two back on the radar for many investors, but the best reason to buy it has nothing to do with takeover rumors.
