URGENT! Endeavor-WMA Merger Hangs By Thread: Stop Or Go Decision Thursday

EXCLUSIVE: I’ve learned that, for the past two weeks, meetings between partners of William Morris and Endeavor agencies have been fraught with tension. The reluctance now to merge isn’t on the WMA side because Jim Wiatt and Dave Wirtschafter are known to be eager for this deal to happen. Rather, it’s from Endeavor’s side because there are fears there’s too much risk and not enough upside. On Thursday, which has been the day both sides have met for weeks now, all the designated partners will confab about the deal’s economics and then decide what the next step is. That’s when the two agencies will either agree to continue negotiating this merger or not. “Thursday is a big day,” a source tells me.

Adding to the problem is that WMA has been obstinate when it comes to the two agencies’ discussions about who should stay and who should go if the two tenpercenteries merge. Emanuel, for instance, has been screaming at Wiatt, and battles have broken out among some of their subordinates. “Wiatt is trying to sell the group on his judgment and his leadership to save his people,” one insider tells me. “Because Jim knows this deal will dismantle his company. So when Ari pushes Jim’s buttons, Wiatt panics and goes on the defensive. ”

My insiders at WMA acknowledge, “Dave and Jim have failed as leaders. Yet they want the last hurrah and to let people think they’re in control. But they’ve got to let Ari lead and get out of his way.”

The rumors of a William Morris-Endeavor merger had been around for months and months, and I know some phone calls were exchanged after the end of the writers strike a year ago. But the reality is that these deals aren’t done overnight: like everything in Hollywood that involves ego and money, they’re complicated because they combine different agency cultures as well as partners and personnel. (Who else remembers back to 1992 when William Morris acquired Triad? The two agencies had been talking for 17 months; and, even when those chats became very serious, the deal points took five months. And let’s not forget the back story behind the ICM-Broder merger.) But I was the first to report that talks had heated up between upstart Endeavor and venerable William Morris to the point where I was being told by mid-February the odds were “70/30” that the two agencies would do a deal. Endeavor’s Ari Emanuel has been on the prowl: he even had several meals with ICM’s investor Rizvi Traverse that didn’t go anywhere. But Endeavor-WMA looked to be a great fit: William Morris with a powerhouse music division but also a motion picture talent department needing more marquee names and a flagging television department except for unscripted fare. Endeavor, on the other hand, has been signing marquee names and packaging primetime series galore and would love that music money. One agency is strong where the other is weak. But the problem is what it’s always been: the alpha male owners of major agencies always want to be in charge: Ari Emanuel to run the combined agency as long as Jim Wiatt gets a fancy title and an uber-lucrative contract. Besides, if Wiatt doesn’t make this move now, then WMA will turn into a music agency and he could get sidelined.

One of the first hurdles to overcome was the tax consequences of any deal. It all had to do with “LLC” and “S” corporations, which could have meant writing checks in the millions of dollars to the U.S. government. Also, I found out there was at one point a 3rd company involved as an investor and partner. Then I reported on March 13th that the tax issues had been resolved.

That the deal was proceeding became clearer when I reported that founding partners at Endeavor had been phoning clients to make sure they’d signed their agency contracts. One screenwriter who had been there awhile was surprised that, 2 hours after a partner called, the contract was messengered to the scripter’s office. Then again, that happened right before Broder merged with ICM. And also a few years ago when WMA was in the final stages to merge with United Talent in a deal that never closed.

Both sides now realize that any newly merged company has to consist of only 150 core movie/tv agents at most. The mantra of these negotiations is “make it smaller”. That means, of WMA’s 150 agents, and Endeavor’s 100 agents, about 100 from the combined total will have to be let go. And since CAA’s Richard Lovett has pursued a policy of 100% marketshare when it comes to clients, the new WMA-Endeavor is making as its goal to rep only the elite Top 2%.

The prospect of inevitable consolidation has led to both agencies finding themselves Rumor Central and denying that wholesale layoffs have started when they haven’t. There are persistent whispers of a pre-merger shakeup at WMA involving motion picture talent department head Gaby Morgerman. (I’ve been receiving nonstop complaints about Morgerman from inside WMA for almost a year now.) “It’s one of many conversations about examining our talent department and how to make it work more efficiently. Some of these conversations have included Gaby, yes. We have to make things better,” a WMA insider told me.

Endeavor partner Patrick Whitesell especially has expressed frustration with WMA’s attempt “to pump its chest like crazy” over its talent department even though Hollywood knows it’s been weakened by agent layoffs and client defections. At one recent meeting, WMA agents were boasting about having just signed Sex And The City‘s Kristin Davis. The Endeavor agents were seen rolling their eyes, and Ari and Patrick were overheard saying quietly to the other, “Didn’t we fire her?”

I also hear that the Endeavor side has not tried to hide that its TV agents think WMA’s Aaron Kaplan should be “on top of the list” of people let go as soon as a deal is consummated. Hollywood is well aware that, under Kaplan, the Morris TV department has plummeted in prestige and power and packages, whereas Endeavor is a juggernaut these days. But Wiatt is Kaplan’s mentor, and Jim has been trying to wheedle, and even beg, Endeavor to keep Aaron on board. It’s such a non-starter that even Kaplan knows the ax is about to fall and called up United Talent.

It’s weird, too, that Endeavor has signed two William Morris clients in a row recently (Sean Hayes and Rain Wilson). Usually, when there’s a deal in the works, the two agencies agree not to poach. Then again, I’m told that Jim Wiatt told a WMA staff meeting on March 11th that any merger deal wasn’t happening right away and the tenpercentery should stay focused on its clients.

After another particularly ugly meeting took place recently between the two agencies, a depressed Emanuel started using the phrase, “We all need a bigger boat.”

Repeated battles even have broken out over what to call the new agency. WMA keeps fighting tooth and nail to keep its name atop the merged company, citing its long-standing brand. Endeavor is arguing that brand is moldy oldie. “Morris is trying to hold onto anything to keep their respect and pride,” one source tells me.

There’s no question right now that Endeavor is in the driver’s seat with regard to this deal. “If they decide to walk away, they know William Morris is going to chase them and acquiesce to some of the areas that are in conflict because Morris wants it so badly.” I’ll let you know as soon as I know the next move in this negotiation.