Providence Equity’s $580 million takeover of London-based Chime Communications should provide a boost to the agency’s sports and entertainment business as it seeks a foothold in the United States, analysts say.
Its sports offering, through CSM Sport & Entertainment, represents about two-thirds of Chime’s overall business. CSM had publicly expressed its plan to increase its sports-related revenue in the U.S., even before Providence formalized its offer within the last two weeks. But if Providence’s acquisition closes, it could provide a significant shot of resources and expertise for CSM Chief Executive Zak Brown, who was promoted to that role in March.
Brown’s two primary charges were to expand the sports business in the U.S. and integrate the 12 sports agencies around the world that make up CSM. While neither Brown nor any Providence official would speak about the deal, others saw the equity investment as only a positive for CSM’s growth efforts.
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The Ironman Triathlon and Learfield Sports are among Providence Equity’s other holdings.
Photo by: GETTY IMAGES
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“I believe Providence, with its track record of savvy U.S. sports property investing and the successful build-out of its existing sports portfolio, should catalyze Chime’s efforts to expand in the U.S. and further integrate its sports marketing business domestically,” said Chuck Baker, a partner at merger-and-acquisition firm DLA Piper.
Providence, a private-equity megafund started in 1989 by CEO Jonathan Nelson, manages $40 billion in assets and specializes in communications and media. Among its many holdings are collegiate marketing giant Learfield Sports, Ironman Triathlon and YES Network. Providence also has a 25 percent stake in SUM, the marketing arm of Major League Soccer.
Insiders said they heard only in the last four weeks or so of Providence’s interest in Chime, which formerly was a public company that will become private under Providence. WPP also will roll over its 20 percent stake in Chime into the new ownership, but analysts say Providence drove the deal from the outset. Sources said Providence was intent on making the acquisition with or without WPP.
Andrew Tisdale, managing director in Providence Equity’s London office, spearheaded the acquisition. Chime’s board approved the offer last week. Moelis & Co. and HSBC are advising Chime.
After Chime publicly confirmed acceptance of the offer, its chairman, Evan Mervyn Davies issued a statement that emphasized Chime’s growth potential in sports: “Chime has achieved great success to date in building a leading position in the global sports marketing and communications industry. … However, to fulfill Chime’s considerable growth potential, significant new capital is required. Providence and WPP offer Chime both the capital and the industry expertise to fast-track our ambitions to build a full scale, global sports marketing and communications business.”
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Brown, who founded Just Marketing International, a motorsports marketing agency, and sold it to Chime in 2013, stands to benefit the most as he pushes CSM into the U.S.
Insiders said Providence’s ownership of Chime will do two things for CSM: add money to the acquisition budget and provide guidance on CSM’s growth. CSM has established a North American headquarters in a small New York office, and Brown, who is based in London, is looking for a director to run CSM operations in the U.S.
“We have capabilities that a lot of people, especially in the U.S., don’t know about,” Brown told SportsBusiness Journal in March. “Right now, we’re a well-kept secret.”
Providence’s 2013 acquisition of Learfield Sports could provide a road map for CSM’s future direction. In the two years since that transaction, Learfield has been on a buying frenzy.
The Plano, Texas-based company has acquired five businesses since early 2014, starting with Nelligan Sports. That deal built Learfield’s multimedia rights business into the largest in the country, in terms of the number of schools where the company has rights. Learfield works with 103 schools and 112 total college properties.
In addition to Nelligan, Learfield acquired digital agency Sidearm Sports, two licensing agencies and ANC, a company that builds and installs LED signage. These companies now represent extended business lines for Learfield in the college space.
Analysts say CSM could embark on a similar buying spree to expand its presence in the U.S.
CSM already was vetting acquisition targets this year before the Providence deal, but analysts expect the pace to quicken now. It’s unclear which companies CSM might be pursuing, but Brown has said in the past that soccer is a primary focus for the agency, as well as golf and tennis.
CSM in the past year has consulted with brands at the 2014 FIFA World Cup, Winter Olympics and Commonwealth Games. Its consulting clients include Dove Men+Care, Jaguar/Land Rover and UBS. In the U.S., CSM works closely with UPS and Subway in motorsports.
In all, CSM’s 12 combined agencies have 22 offices in 15 countries, accounting for 850 employees.
Sebastian Coe’s position as chairman of CSM is not expected to change, and insiders say his contacts and influence remain one of the company’s biggest assets.
With Providence taking Chime private, CSM also should gain some needed flexibility, analysts said. Public companies tend to limit the amount of debt they carry, which in some cases could inhibit acquisition efforts. CSM’s only U.S.-based holdings are Indianapolis-based Just Marketing and SJX, Harlan Stone’s boutique sponsorship sales shop.
