Latest WMA-Endeavor Merger Update: Hollywood History In The Making Today: Endeavor And William Morris Vote Yes

6 PM: Three of the Endeavor partners who will sit on the new WME Entertainment board — Ari Emanuel, Patrick Whitesell, and Adam Venit — are at William Morris offices right now introducing themselves to and shaking hands with the WMA agents and staff. “It’s eerily quiet,” one insider tells me. Earlier, Morris boss Jim Wiatt went to Endeavor and introduced himself.

2:40 PM: WME ENTERTAINMENT IS A GO! Here’s the official statement:

ENDEAVOR AND THE WILLIAM MORRIS AGENCY MERGE
Two of the leading entertainment agencies reach historic agreement

(Beverly Hills, CA — April 27, 2009) In a landmark deal, two of the leading entertainment agencies, Endeavor and the William Morris Agency, today announced a merger of both companies. The new agency will be called William Morris Endeavor (WME) Entertainment. The transaction, which is subject to customary closing conditions, is expected to be completed in the second quarter.

The leadership team for the new agency will be Jim Wiatt, Chairman, and Ariel Emanuel, Patrick Whitesell and Dave Wirtschafter, Co-CEOs.

Wiatt, Emanuel, Whitesell and Wirtschafter join company directors John Fogelman, Peter Grosslight, Rick Rosen, Jennifer Rudolph Walsh and Adam Venit on the nine-member board that will guide the agency.

This historical agreement brings together two of the industry’s most respected entertainment agencies spanning motion pictures, television, music, theatre, publishing, commercials, sports, marketing and below-the-line production.

2:39 PM: WMA ALSO VOTED TO MERGE WITH ENDEAVOR.

2:15 PM: ENDEAVOR VOTED 100% TO MERGE WITH WILLIAM MORRIS.

An email went out to the entire Endeavor staff calling for a 3 PM meeting.

There was a point last month when the meetings between partners of the 111-year-old William Morris and 14-year-old Endeavor agencies had been fraught with tension and the merger hung by a thread. The reluctance to combine wasn’t on the WMA side because CEO Jim Wiatt and President Dave Wirtschafter were eager for this deal to happen. Rather, it was from Endeavor’s side because of fears there was too much risk and not enough upside. It took some time, but eventually both sides came together on the deal’s economics. Adding to the problem was the polar opposite corporate cultures of the two agencies. WMA had been obstinate when it cames to the two agencies’ discussions about who should stay and who should go if and when the two tenpercenteries merge. Endeavor’s Ari Emanuel, for instance, was screaming at Wiatt, and battles broke out among some of their subordinates. Eventually, that too was worked out.

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 had 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, had been signing marquee names and packaging primetime series galore and wanted that music money. One agency is strong where the other is weak. But the problem was what it’s always been with these kind of mergers: the alpha male owners of major agencies always want to be in charge. After one particularly ugly meeting between the two agencies, a depressed Emanuel started using the phrase, “We all need a bigger boat.”

Repeated battles even had broken out over what to call the new agency.

One of the other 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 heard that founding partners at Endeavor had been phoning clients to make sure they’d signed their agency contracts.

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 — yet. But they will. (See below for all my merger updates.)

10 AM: I’ve confirmed there’s an Endeavor vote this afternoon, which is when there’ll also be the William Morris vote. That’s right: the merger creating WME Entertainment has not yet officially been approved. Endeavor, now with Tom Strickler’s resignation, is expected to vote 100% for the merger. But there still is speculation that the decision won’t be 100% on the WMA side. (I understand that the William Morris side even held a Saturday session.) There will be a joint WMA-Endeavor meeting sometime this week with all the lawyers present. Then there’ll be Guild and ATA and state and federal government approvals necessary for the two agencies to legally merge. So that’s still at least 2 1/2 weeks away (as I’ve always reported). Don’t expect some big whoop-de-do announcement today. Because it would rob both agencies of what should be a major media blitz in May when everything’s official. Otherwise, both agencies will get swamped with media queries about who’s staying and who’s exiting — which will make for a lot of uncomfortable conversations which might not be legally advisable. Today, the agency landscape historically changes.

8 AM NEWS: Endeavor co-founder Tom Strickler has just resigned from Endeavor. He sent around a gracious email announcing that he was leaving the representation of writers and directors. There was always known to be friction between him and Ari Emanuel over the direction of the agency, even though the two go back so many years and have been friends. Ari even got emotional when he told the staff about Tom’s decision. Even though Strickler surprised everyone with his announcement this morning (he was at all the meetings and never hinted he wouldn’t be part of the merged enterprise), it wasn’t unexpected considering that Strickler was left off the newly merged company board. The word is that Robert Newman will run the new motion picture lit department. I hear that, as part of his resignation, Strickler savvily negotiated his share of the old company’s receivables plus an exit fee of half what the other board members are getting going forward. Tom has been against the idea of Endeavor merging even going back to when the agency was in serious talks with United Talent — and would have resigned then, too.

Speaking of United Talent, I’ve confirmed that one of the agency’s owners picked up the phone to William Morris boss Jim Wiatt about a month ago and said, “If you’re not too far down the road already with Endeavor, you might consider merging with us instead.” Here’s the thing: the other UTA owners didn’t know this phone call was being placed. That said, it’s unclear whether the goal was to really merge or to play with peoples’ heads.

I reported last week that WMA motion picture lit agent David Lonner and Steve Rabineau didn’t want to be part of the merger (WMA Agents Lonner & Rabineau In Play). Now Lonner is talking to Jimmy Miller and to Management 360 about coming on board as a manager, as well as about being an agent at United Talent. But I hear Lonner is being clear that he doesn’t know if J.J. Abrams will come with him. (At WMA, Lonner reps JJ with motion picture head John Fogelman.) Meanwhile, WMA’s Steve Rabineau is set to move to UTA.

I hear Mark Itkin, whose contract at WMA goes until at least 2012, is ready to make that move to CAA and fill the reality leadership position that has sat vacant all this time after Michael Camacho was pushed out. Since then, Camacho has been killing CAA in reality at UTA.

It will be at least 14 months before WMA’s new building is ready to house the newly merged WMA-Endeavor agency. So, until then, both agencies will “mix and match” buildings, I’m told. I hear that television will be housed at Endeavor under Rick Rosen. And Endeavor’s motion picture department will move to the old Morris building. And, yes, Ari Emanuel, will move his office to WMA to be near Jim Wiatt’s. (Didn’t I tell you this was going to get fun quickly?)

So I hear that, back in March, the first meeting between WMA book agent Jennifer Rudolph Walsh and Endeavor book agent Richard Abate went really, really badly. Apparently, the two hated one another. There was even an unsuccessful attempt by WMA to push Abate out. Ari pushed back. Soon everything calmed down. Why? I’m told it was because Ari saw that WMA has a $20 million book business whereas Endeavor’s is still new. And that trumps personality conflicts.