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SBD/December 18, 2013/Finance
William Morris Endeavor, Silver Lake Partners Acquire IMG For Estimated $2.4B
Published December 18, 2013
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CUTTING COSTS BY FINDING SYNERGIES: WME was willing to pay more than other finalists for IMG because Emanuel, Whitesell and Silver Lake Managing Dir Egon Durban believe they can find a way to cut costs by finding synergies between the two companies and increase revenue by acquiring more sports and entertainment events and media. A source familiar with WME's plan says it hopes to cut more than $100M in costs from IMG's business. Two sources familiar with WME said the company's EBITDA is approximately $90M, and it hopes synergies between its business and IMG allows it to boost the combined EBITDA from the two companies to more than $350M. WME's plan to cut costs at IMG is similar to the approach that Forstmann Little took after acquiring the company. Its effort to eliminate cost led to a two-year period of staff departures and turnover as Forstmann reshaped the company. Staff across IMG expressed concern throughout the sales process about a potential WME acquisition, in part because Endeavor Talent Agency's merger with William Morris in '09 led to the departure of more than 200 employees. But WME is just as focused on investing in the company as it is on eliminating costs. With financial support from Silver Lake, it plans to acquire additional events and bid on more media contracts. It also sees opportunities to further develop the college business, which has expanded from its core multimedia rights business into hospitality, ticketing, seating and other businesses.
PUSHING IMG BACK INTO REPRESENTATION: WME is poised to push IMG back into the talent representation business, as the company wants to add more golf and tennis clients and strengthen those two business units. It also plans to push into other sports by offering clients an opportunity to work with a company that has deep ties to the entertainment world. WME sees opportunities to replicate the success it has had with current client Michael Strahan. When the former Giants DE retired, WME arranged for him to join Fox' NFL pregame show and replace Regis Philbin on "Live! With Regis and Kelly." Successfully doing these steps will require blending two distinct cultures and two very different companies. IMG has more than 3,500 employees and 130 offices worldwide. Its primary offices are in N.Y., London, Cleveland and Florida, and its biggest businesses are IMG Media, IMG Sports & Entertainment and IMG College. Its talent representation practice in sports is much smaller today than it was when Forstmann bought the company. Since then, it has lost agents like Tom Condon, Casey Close and Mark Steinberg and clients like Saints QB Drew Brees, Yankees SS Derek Jeter and Tiger Woods. It still represents Danica Patrick, Novak Djokovic, Venus Williams, Maria Sharapova and Broncos QB Peyton Manning (for marketing), among others, but that is not the focus of its business. In contrast, WME is defined by its talent-representation business. The company, headquartered in Beverly Hills with offices in N.Y., London and Nashville, represents some of the top names in film and television, including Robert Redford, Emma Stone, Christian Bale, Martin Scorsese, Aaron Sorkin and others. Its music group works with Tom Petty, Adele and Blake Shelton, and its literary clients include Malcolm Gladwell and Facebook's Sheryl Sandberg. In sports, Emanuel works with the UFC and Jill Smoller, who heads the WME's sports group, works with Serena Williams, Nets F Kevin Garnett and others.
|Shapiro is expected to stay involved with IMG
after advising WME during the bid process
BUILDS ON PLANS TO DIVERSIFY: The WME acquisition builds on the Hollywood agency's push to diversify its business at a time when DVRs and on-demand viewing have triggered declines in the film and TV industry. Emanuel, the inspiration for "Entourage's" Ari Gold, and Whitesell, the former head of CAA's talent department, have responded by investing in businesses such as the independent advertising agency Droga5 and the e-commerce company OpenSky. IMG extends that by making WME one of the largest companies in sports.
Staff writers Michael Smith and Daniel Kaplan contributed to this report.