EXCLUSIVE DETAILS: CAA and private equity firm TPG have agreed to a deal that raises the latter’s stake in the Hollywood agency from a 35% minority to 53% majority shareholder stake. TPG is paying around $225 million in equity for that stake, said an individual with knowledge of the transaction. There is also a plan to borrow an undisclosed amount of debt as part of a transaction that will allow the agency to continue growing. It is also likely that CAA will also spread some of the proceeds around to its most valuable performers.
The prospect of TPG doubling down on CAA first cropped up last week. It is a significant development, marking the first time that agency is not majority-owned by its operating principals. CAA launched with an original ownership group headed by Mike Ovitz and Ron Meyer, and it was acquired by their still active successors, a group headed by Richard Lovett, Bryan Lourd, Kevin Huvane and David O’Connor. Speculative reports were that the fundraising would position the agency for a public offering or that the brain trust might be looking to cash out and find new mountains to climb. Neither is the case, from what I can tell here. Part of the deal comes with long-term extensions for the agency’s management team. Also, the agency’s debt level is reasonable: adding the new debt to the old, the total figure will be in the $400 million range. That is a lot less than its major rival WME, which closed an acquisition of powerhouse sports business IMG for over $2 billion. CAA has been building its sports business that started through piecemeal manpower acquisitions and natural growth for close to a decade.
Both agencies now count on sports for major pieces of their bottom lines, along with traditional client representation and other new avenues including investment banking. CAA has also launched a venture fund, founded tech start-ups, established outposts in China and India, created a brand marketing firm and started a private equity vehicle. According to the deal announcement, CAA claims it services more than double the on-field contract value of any agency for over 1000 jocks on the roster, and over $3 billion in property sales deals for among others Madison Square Garden, Yankee Stadium and FC Barcelona. Brands repped by CAA Sports include JP Morgan Chase and Emirates airlines, and Switzerland-based affiliate CAA Eleven manages the centralized broadcast, digital and sponsorship rights for more than 560 premier National Team Football matches worldwide for the European football governing body UEFA. Its Evolution Media Capital, which advises on transactions focused on the media and sports industries, has brokered billions of dollars in transactions for clients including the Los Angeles Dodgers, the Pacific-12 Conference, and the NHL, and has raised capital or structured debt financing for entertainment companies.
Sports and other areas have become big global growth areas for both CAA and WME. I’m told that when TPG first invested in CAA in 2010, the agency was valued at around $700 million; that number has surpassed $1 billion, per the source with knowledge of this transaction.
“We are excited about expanding the ways we serve clients and taking advantage of countless new opportunities as technology, content, brands, sports and media converge,” CAA said in a statement. “TPG is an invaluable partner in the ongoing execution of our plan, providing their vast business-building expertise, unparalleled global network, and ready access to capital for further growth. With TPG’s increased investment in our vision, we have never been more inspired by the possibilities that lie ahead.”
Said TPG co-founder Jim Coulter: “CAA is an unrivaled industry leader, with an exceptionally talented and uncommonly stable management team. They have built their global and diversified platform through relentless innovation and a collaborative culture of client service. The Company has had extraordinary growth across its divisions, alongside intelligent asset-building and principal investment strategies, and we are enthusiastic about the continued success ahead.”