WE ARE GOING TO BUY TSR!

TSR was an American game company and the publisher of Dungeons & Dragons.

The company has a colorful history but the only information relevant to this story is that in 1997 TSR had major financial difficulties.  In fact, it was facing insolvency.  Bob had worked for TSR years before and he was aware of their problems.  TSR may have been in trouble but Dungeons & Dragons was still a premier brand.  As far as deals were concerned, this one was not as crazy as it sounded.

In the spring of 1997, TSR missed the ship date for new releases for the first time in over a decade. Something was clearly wrong. TSR attended that year’s GAMA Trade Show with a skeleton crew who basically answered no questions and looked miserable. TSR’s freelancer community (who were also at that show) started wearing black armbands to commemorate “the death of the industry, a boycott against CCGs with deeper meaning”.

Bob parlayed his old connection with TSR into a phone call with the TSR CEO and largest shareholder. Bob told her that he was connected to a network of investors in the Seattle area who might be able to finance a rescue of the company. The investors in FRPG were a pretty amazing group of people, many of whom are now members of the ultra-rich (and who were doing pretty ok even in the mid-90s), so he could legitimately make the claim that he might be able to save her from bankruptcy. Of course, she didn’t know that FRPG was hemorrhaging money and was staring down the barrel of its own liquidation in the not-too-distant future.

I hit the road visiting distributors and stores and Ryan flew out to the TSR home offices.  It was his job to dig into the books and see just how bad things were and work with the team at TSR to come up with a valuation.  Each night, Ryan and I would make a call to update each other on the progress of the day.  My days were pretty much the same.  I visited X distributor and sold them some more products.  Ryan, however, was on a nerd’s quest.  He loves data and spreadsheets and information and he dug into the TSR books like Indiana Jones searching for the Lost Arc of the Covenant.  Ryan is a true believer so once he was on the scent of buying TSR, the logic of just how hard it would be left his body.  He spent his days digesting data and his evenings talking to me about his ideas and plans for reviving the company and the business.  

I was still a bit shell shocked.  As the data came in, Bob used it to start rounding up possible investors and he was getting bites.  Seattle was nerd central and lots of computer industry folks had grown up playing D&D.  Fat stock options and the first stirrings of what became the “dot-com” mania meant motivated investors.  

The craziest part was Bob’s pitch to investors did not include bringing in new talent.  He planned on handing over the business operations to Ryan and sales responsibilities to me.  I actually objected in one call back to the office saying I was not qualified to take on mass market sales of Dungeons & Dragons and TSR’s other properties.  Bob just laughed. 

“You are more qualified than you know.”  Yikes.  

This went on for about four weeks; Ryan digging into the TSR books, me on the road, and Bob courting investors.  My final stop was Albuquerque, New Mexico.  Home of Wargames West distribution.  The weather had turned and it was warm in the south.  I ran multiple days of sales promotions, visited stores and ran events, and when I realized I could not do any more, I got on the phone and called Seattle.

“I am sorry, Bob, but I think I have sold every display I can sell.  I cannot cram anymore in.”  

“You did great,” he said. “We did our best.  We are going to come up short on the investment. Get your butt on a plane and get to Seattle.”

I did.

I prepared again for the end of the road for FRPG and started planning the AEG takeover of the Storyline CCGs.  

I got to the FRPG offices to find out that there was one last silver bullet to fire.  It turns out that the best candidate to buy TSR was Wizards of the Coast but the owner of TSR, Lorraine, hated the owner of Wizards, Peter.  

When I arrived, we huddled up and talked options and then made “The Call”.  We called Peter Adkison.  

The conversation went something like this.  

“Hi, Peter, it’s Bob with FRPG. I am sitting here with John Zinser and Ryan Dancey.  How are you?”

“I am good. How can I help you guys?”

“Well, we have something you want.  So we are going to fax you a piece of paper and you are going to send us over a (BIG NUMBER) check.”

“Why would I do that?” said Peter with a smile and skepticism in his voice. 

“You will see.  What is the fax number?…..”

The offer to Wizards was simple.  During the course of the negotiation with TSR we had obtained the rights of first refusal on purchasing the company.  Bob was sending that memo along with our terms.  We would broker the deal for Wizards to buy TSR and then Wizards would buy FRPG.

Peter may be the biggest Dungeons & Dragons fan on the planet.  Later that day a courier showed up at the FRPG offices with a first payment check for FRPG, as outlined, and instructions for lawyers to start talking about the deal.  

It took many long weeks to close the deal.  A deal that should never have happened.  TSR had set a price that was too high and they had debt service that doubled the asking price. It was an astronomical deal but Peter had gold fever and wanted to own Dungeons & Dragons and I am guessing there was almost no price that would have stopped him. In the end, the Wizards team and the TSR team were able to come to a price that Wizards of the Coast’s board could accept and that Lorraine and the other owners would accept; Wizards paid more than TSR was worth (by any reasonable valuation) and the TSR owners felt they’d swallowed a bitter pill. Acquisitions are hard.

The best part of this story happened after the deal closed.  The Wizards lawyers turned their attention to FRPG.  Time to do a valuation of FRPG.  I was glad to be at the office on this day.  Bob was in rare form.

“That’s fine,” he said, “You can do a valuation but the business is valued at X and you need to send us a check.”  

The lawyers were flabbergasted until he showed them the signed deal sheet.  Then they were just ……

“When you buy TSR you will then purchase FRPG for X.”

It took more than a day to get that second check but we eventually got it. Wizards paid more than FRPG was worth (by any reasonable valuation) but they were paying for the right to buy TSR, and the amount they paid for FRPG was less than the commission they would have paid a broker if the deal had been done in a traditional “high finance” way.  

Bob was done.  There was no spot for him at Wizards.  Ryan, who lived in Seattle, assimilated into the Borg collective pretty easily.  I, on the other hand, was a bit different.  Wizards was obviously confused by the fact that AEG and FRPG were not one and the same. So, in their eyes, this deal had worsened.  No one at FRPG was fired.  They were all offered jobs, including me.  

As if this story could not get any stranger, I worked various jobs at Wizards of the Coast.  I started in their sales department, then marketing, and finally in new games with one of my favorite people, Rich Fukataki, as my boss.  

Two years after the acquisitions of FRPG and TSR closed, Ryan moved away from the CCG business and took over the reigns of the tabletop RPG business. The year after that he managed the team that released the 3rd Edition of Dungeons & Dragons, which successfully rebooted the business model for roleplaying games and together, with hard work on the magazines and Gen Con, made the deal a financial winner for Wizards of the Coast and their shareholders.

Two years after that in the echoes of the dot-com bubble bursting, and reacting to the company having become bloated and unfocused after the incredible success of Pokemon, which was acquired itself by Hasbro, Wizards decided to downsize its product offerings and made it possible for AEG to buy L5R back. But that’s another story for another day.

 

PS- Turns out the ‘run your money for the cliff’ plan worked for those investors.  Even though FRPG had failed, they had won.  The business had been bought and their investment paid out handsomely.  I lost track of Bob after the FRPG deal closed.  I understand he moved on to the purified water business.  I can see him pitching those investors now.  

“We are going to take your money and run it straight towards the waterfall……”  

Thanks, Bob.  Ryan and I learned a ton from you.