Hollywood talent agency William Morris Endeavor and its private equity partner Silver Lake will announce as early as today a $2.3-billion deal to acquire sports marketing and media agency IMG Worldwide, according to numerous reports.
The combination will “create a formidable presence in the sports agency business,” the Los Angeles Times’ Daniel Miller writes, and “intensify [WME’s] competition with Creative Artists Agency for supremacy in the talent agency business, demonstrating that the battle has moved beyond television and movies and into sports.”
Investment firm Forstmann Little bought IMG in 2004 from trusts established by IMG's founder, sports-marketing pioneer Mark McCormack, and from the family of Arthur J. Lafave, Jr., IMG's vice chairman, for $750 million, according to IMG’s adviser for the sale, Jones Day. IMG’s first client was golfer Arnold Palmer, a deal that “changed the world of sports and business forever,” as Golf.com’s Damon Hack put it. Forstmann Little decided to sell IMG after senior founding partner Ted Forstmann died in 2011, according to reports.
Representatives for Forstmann Little & Co. and Silver Lake, which bought a reported 31% stake in WME last year, declined comment on the pending deal.
“Both a talent agency and producer, IMG represents the likes of Peyton Manning, Taylor Swift and Justin Timberlake,” writes Paul Bond in the Hollywood Reporter. “It makes sports programming, has a brand-consulting group and handles marketing and ticketing for 200 collegiate sports properties.”
IMG also represents golfer Tiger Woods, tennis player Novak Djokovic and supermodel Gisele Bündchen. WME’s clients include Christopher Nolan, Lady Gaga, Oprah Winfrey and Seth MacFarlane.
“After a months-long period of courtship and bidding” — with a second round last week — sources tellVariety’s Cynthia Littleton that advisers Evercore and Morgan Stanley “focused on the WME-Silver Lake combo because it was the highest of the three offers submitted by last Friday’s deadline. The other contenders, Chernin Group with CVC Capital and ICM Partners with Carlyle Group, were said to have bid just under $2 billion.
WPP CEO Martin Sorrell said last month that he “would love to own” IMG “but said his company cannot afford it, as a frothy auction process pushed valuation towards the $2.5 billion mark,” Reuters reports.
IMG’s businesses include “IMG Fashion, which owns and operates fashion events around the world, including Mercedes-Benz Fashion Week; IMG Models; IMG College, handling collegiate marketing, licensing and media rights; IMG Media, an independent producer and distributor of sports programming, and IMG Events and Federations, which owns and manages events with international sports organizations, leagues and federations,” reports Lisa Lockwood in Women’s Wear Daily.
“WME and CAA fiercely compete for clients and bragging rights around town,” the LAT’s Miller writes. WME launched a “derisive advertising blitz” in June that targeted CAA with dozens of ads around Los Angeles that “featured the word ‘CAAN'T’ in CAA's signature red-and-white color scheme.”
Besides creating an agency that “would leap ahead of its primary rival,” CAA, write Brooks Barnes and David Gelles in the New York Times, “the acquisition, with its accompanying thrust into sports events and interests like media and fashion, moves William Morris Endeavor’s center of gravity away from the increasingly troubled businesses of movies and television, where growth potential is limited.”
“There are certainly content opportunities for William Morris,” observes former Madison Square Garden President Bob Gutkowski, who is now a partner in private equity adviser Innovative Sports & Entertainment. “There are opportunities to build a television arm of IMG,” he tells Bloomberg’s Scott Soshnick and David Welch.
“Shifting Hollywood economics” are pushing both WME and CAA “into fields that would have seemed unfathomable only a decade ago,” observe Matthew Futterman, Dana Cimilluca and Erich Schwartzel in the Wall Street Journal. “The firms have expanded into technology investing and marketing, for example,” as fewer big movies and TV sitcoms are produced, reducing the commissions agents have reaped from A-list stars they represent.
The New YorkTimes piece ledes with a colorful characterization of WME co-CEO Ari Emanuel, 52, who, “over the past two decades,” they write, “has climbed — brashly, ruthlessly — into Hollywood’s power center with one position in mind: king.”
But Emanuel’s co-CEO, Patrick Whitesell, 48, told the Fortune Brainstorm Tech 2013 conference that his partner was not, as a questioner suggested, “a lunatic.”
“The thing about Ari is, he does get a lot of press for his tenacity, and he may be outspoken at times, but what’s interesting to me about Ari is that he’s a phenomenal partner, super-creative, unbelievably loyal and not afraid of failure,” Paul Bond reported in July in the Hollywood Reporter.
When the Ari Emanuel movie is made — with bobble-head dolls to go along— will WME represent the talent? Or will CAA?