SBJ/July 11-17, 2016/Colleges

Learfield’s run fuels talk of sale

Could college power bring price of $1B?

Learfield last month closed on its 10th acquisition in two-plus years, adding fuel to the rampant speculation that the company is about to be sold again after a flurry of deals and rapid earnings growth.

The question making the rounds now among industry insiders: Can Learfield fetch a price of $1 billion or more?

Providence Equity Partners, a Rhode Island private equity firm, owns the majority of shares in Learfield, so there’s little doubt the company will be flipped at some point. It’s just a matter of when.

The changing face
of Learfield

Learfield acquisitions under ownership of Providence Equity:
 
2014
Nelligan Sports
Sidearm Sports
Licensing Resource Group
Strategic Marketing Affiliates

2015
ANC
Front Row Marketing (college division)
KP Sports & Entertainment

2016
Think Social
SME
GoVision

Source: SportsBusiness Journal research
Learfield officials would not discuss whether it is technically for sale.

“If we were active or inactive, I wouldn’t talk about it,” Learfield President and CEO Greg Brown said.

Learfield, a Plano, Texas-based collegiate powerhouse that’s been around for 44 years, was bought in September 2013 by Providence Equity, which invests in media and entertainment companies such as Hulu, Ironman, Topgolf and YES Network.

Providence acquired Learfield from another private equity company, Shamrock Capital Advisors, for $570 million, an eye-popping figure at the time.

When the deal closed, Brown, a 32-year company veteran, called it “an exciting new chapter in the growth story.” But no one predicted just how much growth Learfield was about to see.

In the last 28 months, it has publicly acquired 10 companies with expertise that ranges from media and licensing to branding, LED video and digital technology.

All of these new competencies have transformed Learfield from a multimedia rights company that was best at selling radio advertising and sponsorships to a multifaceted, diverse business able to address most any need a college athletic department might have. It’s also grown from 500 employees in 2013 to 1,000 employees now.

Industry sources say the growth has lifted Learfield’s net earnings before interest, taxes, depreciation and amortization in the range of $70 million to $80 million for the fiscal 2015-16 year that just closed on June 30. If Providence could sell Learfield for a multiple in the 13-15 range, that would put the price at $900 million to $1.2 billion, figures that once would have been unheard of for the company.

Learfield also would be selling against its projected earnings for 2016-17, a number that is expected to be closer to $90 million, sources say, which could drive the sale price higher.

While a multiple as high as 15 sounds ambitious, sources said that Shamrock sold Learfield for a 15 multiple in 2013. The multiple in the next sale will be determined, in part, by how much growth potential is left in the company and other market conditions.

By comparison, IMG, with EBITDA of $194 million in 2013, sold for $2.4 billion, or a multiple of just more than 12.

A price tag in the $1 billion range would significantly thin out the number of deep-pocketed buyers for Learfield. But other factors, like the presence of a Chinese buyer or multiple bidders, could drive the price up.

Multiple analysts in sports-related mergers and acquisitions disagreed on whether a domestic college business like Learfield might be too U.S.-focused for a foreign buyer, like China’s Dalian Wanda Group, which last year bought Ironman triathlons for $650 million from Providence.

Company officials at Learfield are notoriously quiet about their financials and even now will not confirm the sale price from three years ago.

When asked in recent weeks if Learfield is for sale again, Brown said, “When the timing is right for Providence and for us, we’ll probably do something. But there’s nothing specific that I’d talk about, ever.”

Brown, who joined Learfield in 1984 to sell radio advertising for the Iowa State network, took the titles of president and CEO in 2009 as founder Clyde Lear entered retirement. Diversifying the company has been central to Brown’s strategy for earnings growth. After spending nearly 40 years as a multimedia rights holder, Learfield has been recently focused on business extensions that go beyond the core competency in media and sponsorship sales.

Business extensions like video technology, ticketing, concessions, licensing or other areas allow for revenue growth from existing college relationships.

Some of those business extensions were formed prior to Providence’s acquisition.

Learfield went into business with its chief rival, IMG College, to create a joint venture called IMG Learfield Ticketing Solutions, which handles ticket sales and marketing for 38 school clients. Learfield also formed a partnership with concessionaire Levy Restaurants at a half-dozen schools.

Recent Learfield acquisition GoVision supplied secondary center boards at the 2014 Final Four.
Photo by: MICHAEL SMITH / STAFF
When Providence, led by Managing Director Michael Dominguez, bought Learfield in 2013, Brown’s vision of new business extensions hit warp speed.

The first deal under Providence was for Nelligan Sports, which brought the rights to 41 more schools under the Learfield banner and added 85 new employees in February 2014. Other deals soon followed. COO Marc Jenkins, hired from NASCAR in 2014, was brought in to oversee the new lines of business.

The acquisitions have enabled Learfield to take a giant step toward being a one-stop shop for athletic departments.
Need a center-hung scoreboard? Learfield’s got a company for that — it bought ANC last year.

Need a new web developer/operator or a mobile app? Learfield bought Sidearm Sports in 2014 to address that space.

Need a new social media strategy? Learfield bought Think Social, a social media specialist, in February.

The most recent deal — the June 29 acquisition of GoVision from founder Chris Curtis — reflects how Brown’s 30-plus years of connections have driven nearly all of Learfield’s purchases. Learfield became a client of GoVision years ago, renting LED video boards at Oklahoma and other schools for concerts and fan fests, before ultimately buying Curtis’ business.

Last month’s acquisition of Ed O’Hara’s SME, a New York branding agency, grew out of another business deal. Learfield hired SME to rebrand the company last year and Learfield ended up buying the agency, which has a burgeoning college business already.

“Most of our deals have been opportunistic,” Brown said. “If we see something where we can be helpful, and that a deal can be helpful to our business, then we’ll have a conversation. … Providence is encouraging of that.”

Brown doesn’t see any changes in the philosophy of rapid growth that has blossomed under Providence’s guidance, which has increased speculation about the company’s future ownership.

“I don’t think we see any kind of fundamental shift where we’re going to stop having those conversations,” he said. “So, yes, if we see something that makes sense, we’ll talk about it.”

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