Silver Lake, the private equity firm with more than $100 billion in assets under management, on April 2 finalized its months-long planning to take sports and entertainment conglomerate Endeavor private. The deal, expected to close by the first quarter of 2025, will see Silver Lake pay $5.8 billion in cash and values Endeavor at $13 billion. It also ends a relatively short and disappointing stretch for Endeavor as a public company, and in so doing raises critical questions about what comes next for the sports and entertainment giant.
Though Silver Lake has offered little indication of its near-term plans for Endeavor, multiple industry insiders said they expect the private equity firm will likely look to sell off segments of the company after the take-private.
One clue hinting at future consolidation plans can be found in a new section of Endeavor President and COO Mark Shapiro’s employment contract that details a bonus structure related to the sale of Endeavor assets not considered vital to talent agency WME or TKO Group Holdings, the parent company of UFC and WWE. Shapiro will receive $20 million for each of the first three tranches of $1 billion worth of Endeavor assets sold. He stands to make up to $100 million in total asset sale bonuses.
It’s not yet clear where the firm may first choose to downsize. Beyond WME and TKO, Endeavor’s wide-ranging “flywheel” of assets includes Professional Bull Riders, hospitality business On Location and betting data firm IMG Arena, among others (Endeavor last October said it wouldn’t consider selling its 51% stake in TKO). Endeavor last year already exited positions in Learfield and IMG Academy. The company’s events segment, which includes the operation of some ATP and WTA events, is its largest by revenue but least profitable by margin (see chart above).
Endeavor’s wide array of subsidiaries has often been blamed for the tepid response from investors. Since listing on the NYSE in April 2021, Endeavor’s share price fell 25% from $24 to around $18 by last October, when controlling shareholder Silver Lake announced its plans to take Endeavor private (the S&P 500 rose some 25% over that time). Endeavor CEO Ari Emanuel has long stressed the “dislocation” between Endeavor’s share price and its true value.
“I actually don’t expect it to be 15 times [revenue], because that’s the private market,” Emanuel said last fall in reference to valuations for recent sales of CAA and Quint-Events. “It shouldn’t be 1½ times [revenue]. Give me six. I’ve got kids to feed.” Endeavor last year generated nearly $6 billion in revenue.
One source noted public markets have often undervalued sports assets, with stocks including Manchester United and MSG Sports trading well below where they would likely be valued in a private transaction.
Despite the share price struggles, Endeavor’s management team is being well rewarded through the Silver Lake transaction.
In addition to his potential asset sale bonuses, Shapiro will now make $7 million per year in base salary — up from $3 million — and receive a $15 million annual cash bonus. Emanuel will receive a $25 million bonus after the Silver Lake transaction closes. He and Executive Chairman Patrick Whitesell will each be entitled to a quarterly royalty of 2.5% of WME’s net cash profits, and each will be transferred ownership of a Bombardier Global Express private jet from Endeavor.
Perhaps most notably, Silver Lake also will provide $250 million in startup capital for a sports and media company to be founded and led by Whitesell. According to an SEC filing, the yet-to-be-named company has plans for “investing in and providing services to companies in the entertainment, media and sports industries,” in addition to producing multimedia content, managing talent and consulting with other entertainment companies.
