What’s next after $2 billion Learfield-IMG College merger?
For more than a year, the Department of Justice closely investigated the proposed merger of Learfield and IMG College. It studied whether such a behemoth, with multimedia rights to 54 of the top 65 schools, would be too controlling. It grew concerned that one company with so much market share would restrict a competitive marketplace, preventing smaller players from winning business or tying executives down with non-compete clauses.
The lengthy 15-month DOJ investigation lasted so long that it prompted whispers before the holidays that the deal might be outright rejected. But on the final day of 2018, the DOJ finally approved the merger and with it sent a clear message: College sports will still be a competitive, open marketplace.
Two significant conditions directly address that — the elimination of exclusive negotiating windows and non-compete clauses, which will allow employees with valuable knowledge and experience on college marketing and media deals the freedom to move without restrictions.
Exclusive negotiating windows, which are common in just about every multimedia rights contract, have long been used to negotiate renewals before deals expire so that a school’s rights never make it to the open market.
That was a tall barrier to entry for any newcomer trying to break into the space because it gave the incumbent such a clear advantage. The absence of exclusive negotiating windows for Learfield IMG College could result in more multimedia rights hitting the open market sooner and leveling the playing field, at least somewhat, for agencies with smaller businesses. The DOJ went with this option rather than forcing Learfield IMG College to divest of school properties or other lines of business.
Learfield, IMG College New Key Leadership
■ Greg Brown: President and CEO; board member
■ Andy Rawlings: Chief revenue officer
■ Michael Angelakis: Atairos CEO and chairman; board member
■ Patrick Whitesell: Endeavor executive chairman; board member
■ Jason Lublin: Endeaver CFO; board member
But some industry insiders said Learfield IMG College will simply renew its deals earlier, whether a window exists or not, although schools could be tempted to go to the open market to see if a more aggressive offer awaits.
The other condition is that non-compete clauses in Learfield IMG College employee agreements are voided. If a school decides to take its rights in-house or switch rights holders, employees will have the freedom to move with the property.
Both conditions came out of the DOJ’s antitrust investigation into the $2 billion merger, which put the two most dominant players in the space under one ownership. The DOJ reviewed both companies, which combined own the multimedia rights to more than 200 schools in all.
Part of the DOJ’s responsibility was to determine if Learfield IMG College would represent a monopoly in the sector, given its 83 percent market share. The next closest rights holder in the power five is JMI Sports with four schools, Fox Sports with four and Outfront Media Sports with three. That kind of dominance, especially in the power five, provides Learfield IMG College with a substantial advantage in the marketplace because the company can provide sponsors with a national platform across hundreds of properties.
Learfield IMG College also owns a dozen ancillary businesses, including Sidearm Sports, ANC, Paciolan and Learfield Licensing Partners, which will join IMG College Licensing to represent nearly all of the power five’s licensing interests.
Learfield argued during the DOJ investigation that its intent in bringing together all of these services is to create a one-stop shop for the college space, much like a league office in the pro ranks. For a unified Learfield-IMG College to compete against the pro leagues, it needed this kind of scale.
Throughout the DOJ’s review, however, Learfield IMG College also maintained that its size wasn’t anti-competitive. In fact, JMI Sports teamed with Legends to win the coveted multimedia rights at Notre Dame last year in the midst of the DOJ investigation. Learfield and IMG College showed interest in Notre Dame, but it’s uncertain how competitive their bids were.
Schools such as Kentucky and Michigan State opted to go with smaller multimedia agencies in the past because they wanted more individualized attention rather than being one of a hundred school clients. Those examples show that smaller agencies can compete for blue-chip rights.
The DOJ would not comment on its investigation. Several athletic directors said they were told about the merger conditions last week when the deal officially closed.
Learfield IMG College will become a massive company with 2,300 employees scattered across the country. It had a combined revenue in 2017 of more than $1 billion and close to $150 million in earnings before interest, taxes, depreciation and amortization, sources say.
Like most mergers, this one is expected to come with cost-saving measures to enhance the bottom line. Sources say Learfield IMG College has targeted millions in savings, largely by reducing headcount from redundant positions. Those 2,300 employees operate out of close to 300 offices, many of which are housed inside athletic departments. It’s not known what the timeline will be on those moves.
Learfield IMG College officials would not comment on any financial information or its integration plans. But sources familiar with both companies say the unified business will be under immediate stress to grow its top line and bottom line. Both Learfield and IMG College are owned by private equities that will be looking to capitalize on a major return in three to five years. Atairos Group owns Learfield, while IMG College and its parent company, Endeavor, are majority owned by Silver Lake.
With so many school rights under one banner now, the potential exists for developing new products and accelerating growth of extended lines of business. As one industry expert said, “It can’t just be more of the same. The pressure is on for them to find new ways to package and sell these rights.”
So, where will the new money come from? In addition to traditional on-campus sponsorship sales, the most obvious answers are:
■ Increased national sponsorship sales across its many schools;
■ Campus+, Learfield’s campuswide marketing program that launched in 2017; and
■ Social+, IMG College’s social-media sales vehicle.
Both Learfield and IMG College have robust national sales divisions. Sources say that Andrew Judelson, an executive vice president over sales and marketing at IMG College, will move into a senior sales position at Endeavor. Roy Seinfeld, Learfield’s EVP, is expected to continue leading national sales under the current structure.
In terms of senior leadership, Learfield IMG College’s front office will largely resemble Learfield’s. Greg Brown, who has 35 years of experience at Learfield, is president and CEO, while Andy Rawlings is chief revenue officer in charge of multimedia rights. The top executive at IMG College, Tim Pernetti, will advise Learfield IMG College during the integration process before moving into a to-be-determined senior position at Endeavor. The company’s board will be represented by Learfield’s ownership, Atairos Group, and IMG College’s parent company, Endeavor. Atairos is a 50-50 owner of the merged company with Endeavor and Silver Lake. Atairos CEO and Chairman Michael Angelakis and Brown will represent Atairos, while Endeavor Executive Chairman Patrick Whitesell and CFO Jason Lublin are Endeavor’s representatives.
Learfield IMG College will be based in Learfield’s home of Plano, Texas. It’s not certain what will happen to IMG College’s headquarters in Winston-Salem, N.C., where there is a huge radio production facility and much of the back-office support for IMG College.