CAA buys ICM to acquire WME, but the goal seems to be to go public
CAA is acquiring ICM with an explicit mission to focus on talent representation, but the parent company has an IPO in mind.
CAA’s proposed acquisition of ICM Partners would reduce the big four agencies to three, but the deal suggests that the magic number could be two. Each of the two largest agencies pursues a different business model: Be like CAA and double the representation business and strengthen your bargaining power against increasingly powerful studios and streamers; or be like WME and try to have both as part of a media empire that competes with and negotiates with Disney at the same time.
Finally, there may only be one way to educate the agencies: while CAA’s focused strategy is very different from the highly diversified Endeavor, it is likely that CAA is also part of a publicly traded company.
Like rival WME, CAA attracted investment from private equity. In 2010, it sold a stake in global private investment company TPG, which manages approximately $ 70 billion and includes investments that range from Vice Media and DirectTV to healthcare companies and real estate companies. In 2014 TPG increased its CAA stakes to a majority stake of 54 percent. Buyout Insider reported in June that TPG is preparing to close a deal with CAA that would “slightly” increase its stake with a valuation of between $ 1 billion and $ 1.3 billion.
WME parent Endeavor, which was listed on the New York Stock Exchange as Endeavor Group Holdings earlier this year, is led by CEO Ari Emanuel. He represents bold names like Martin Scorsese and Dwayne Johnson as he leads a growing empire that includes UFC, Miss Universe, and professional bullriding, as well as the film and TV production arm Endeavor Content. WME has a market capitalization of just under $ 7 billion.
CAA could become part of a stock corporation via TPG, something the private equity parent has long been considering. On Aug. 24, the Wall Street Journal reported that TPG had hired JPMorgan Chase & Co. and Goldman Sachs Group to subscribe to their initial public offering, which could be valued at around $ 10 billion.
“These are the strongest indications that there is a much larger plan compatible with an Endeavor-style IPO,” said Eric Schiffer, chairman and CEO of private equity firm Patriarch Organization. The end result could be a billion-dollar CAA, like Endeavor, with fewer perceived conflicts of interest.
In 2018, UTA sold a “significant equity stake” to publicly traded Investcorp and the Public Sector Pension Investment Board in a transaction that was positioned as a bet on UTA’s core business. “We believe that UTA’s customer-centric business model has strategically positioned the company to capitalize on the continued convergence of talent, content, sales and marketing,” said David Tayeh, Investcorp Head of Private Equity, North America, at the time.
Following the September 27 ICM announcement, CAA made a point of doubling the facts that built their business. When the CAA partners made the rounds in the press, their topics of conversation were clear: It’s about 10 percent. CAA CEO Kevin Huvane told The Wrap that his company and ICM “share a common belief that representation is everything,” while managing partner Bryan Lourd told Deadline, “Our entire strategy is about representation and aggressive advocates for being an artist. This deal makes us feel really righteous and it will serve customers in every way. “
If CAA is still in the business, the midsize, family-run Gersh Agency could be an intriguing mere destination. Gersh showed its outlier status last year when it became the first major agency to sign an agreement with the WGA during Dusup over Packaging in 2019, the lucrative practice of charging talent pooling fees for specific projects.
Other agencies eventually signed and then sold their majority stake in the Mare of Easttown production company Wiip to a South Korean studio. Similarly, Endeavor agreed to reduce its stake in Endeavor content to 20 percent. On Monday, WME launched its WME Independent Division, bringing together Endeavor Content agents under the agency’s umbrella to handle film sales and funding.
Talent advancement is still a huge part of WME’s business, with its hundreds of agents and thousands of customers. It’s also a great source of its power in an industry where studio-level consolidation comes with falling talent compensation, making it harder to negotiate solid deals for clients.
A combined CAA and ICM could set the stage for more battles as led by CAA client Scarlett Johansson, who sued Disney in July over the studio’s decision to debut Black Widow in theaters and on Disney + at the same time. And judging by his vocal support from Johansson in her suit, it’s one thing Lourd is willing to take on.