WME-IMG deal: Former SFX execs weigh in

Former SFX executives give their takes on William Morris Endeavor taking over IMG:

“You will really see IMG ramp up their content creation side now, whether it’s broadcast, digital or cable. You also have to wonder if this means they will get back into athlete representation to leverage content from that. Don’t downplay the fashion side of all this, either. That could be even more important, when it comes to content creation.”
— Bob Gutkowski, former MSG chief, now partner at Innovative Sports and Entertainment, and a principal in the SFX roll-up

“When I started out, There were two companies: us at ProServ and IMG. IMG was like Darth Vader to me then — it was bigger, stronger, tougher.

“When Forstmann bought IMG, they basically concluded that the margins in athlete representation couldn’t support the overhead. Now they are being sold for $2.3 (billion) to $2.5 billion to get into the same business they wanted to get out of. So the question then is whether you can find enough synergies between the sports and entertainment sides to make it work. I’ve had this conversation for many years with Richard Lovett at CAA. … These big agencies — CAA, Morris, WMG, Excel — will be battling it out galatically for the big stats, the way ICM, CAA and Morris battle it out in Hollywood for the big acting and directing talent. My guess is the margins will be pretty thin by then.”
— David Falk, another principal in the SFX roll-up

“The most overused word in business over the past 20 years is synergy. If you have a dollar of revenue and you sell that dollar for $2 and find efficiencies, it can work. If you sell it for $10 or $12, I’m not sure there are enough efficiencies in the world to make that work.

“I am rooting for Ari. I think they will make it work at least as well as CAA has made their sports acquisitions work. The challenge is not going to be so much the culture. The challenge will be making it work financially. Ari is as talented as anyone I know, so I am rooting for him. It will be fun for me, the veteran, to sit back and watch CAA and these guys slug it out. It’s a new balance of power. And the challenge is whether that competition will kill the margins.”
— Falk

“I am surprised at the final closing purchase price, if it is accurate. Based on the $170 million in EBIDA, that is a heck of a multiple and WME must believe that there are significant savings to be gained by the acquisition. I am also interested to see what role Mark Shapiro will play in all of this.

“It seems to me that the success of CAA in sports might have been a motivating factor in the aggressive bid by WME. From the outside, it appears that CAA’s move into sports has been successful for them. … It is also interesting that CAA decided not to compete at the $2 billion-plus level. They already have a successful sports business. Where IMG would have been a significant addition for them, WME had a bigger incentive if they wanted to enter the sports business in an impactful way.”
— Mike Trager, who was involved in the old SFX roll-up

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