‘A Lot Of People’s Judgment Was Very Wrong’

Alan Hirschfield has played both sides of the mergers and acquisitions game. As former chairman and CEO of 20th Century Fox and, prior to that, president and CEO of Columbia Pictures, Hirschfield knows the machinations of Hollywood. On the M& A side, Hirschfield honed hisdeal-making skills with Allen & Co., where he established himself as one of the shrewdest negotiators in the industry.

Today, Hirschfield is a managing director at Wertheim Schroder & Co. On temporary leave from the firm, he is serving as interim co-chief executive of troubled Financial News Network until the company is sold.

Hirschfield shared with VARIETY his views on how the M& A business has changed in the last few years, especially with respect to the entertainment sector. – Paul Noglows

“The entertainment business was very transaction-driven in the 1980s. You saw a lot of deals that took advantage of available financing but really had no other reason for being. The realities of the 1980s allowed a lot of people to get into the business as bankers who didn’t necessarily have any intrinsic understanding of the business or the players involved.

“But by the end of the 1980s, with the failures of DeLaurentiis, Cannon, Kings Road and Weintraub, among others, a lot of people’s judgment was proved to be very wrong. The deal flow dried up and we witnessed the extinction of the independents.

“That development was felt on Wall Street, especially at the bigger firms like Paine Webber that had touted these deals.

“Today, you have a lot of investment banking firms scrambling for a decreasing availability of deals – primarily smaller and midsize deals in the entertainment arena and a smattering of deals in the cable tv and broadcast marketplace.

“The bigger firms will not abandon the area, but it will not be as economically feasible for them to pursue business there and they don’t really have the expertise to do so. They will continue to service the larger companies, which they have served historically. But those companies will not generate the business that they had in the past.

“Since what is left is less a business of megadeals, it requires a much better understanding of the dynamics of the entertainment business and the ability to match those dynamics with the size of the firm doing the deal. Deals will need to be more creative, like Largo Entertainment.

“Today there exists a huge disparity of really gigantic companies and really small companies, and very little in between. Creativity doesn’t flourish in large monolithic type companies. They will continue to control and dominate distribution. But they will not dominate creativity.

“By the mid-90s we will see a proliferation of smaller companies and amalgams of companies that will arise out of the larger companies. It will be an era that sees the emergence of many new entities and alliances, below the umbrella of the four or five major companies on the movie side and the music side and the cable side.

“It’s going to be those investment banking firms that are clever enough and creative enough to match the money and the creative units and understand the dynamics of what’s happening in the business not only in the U.S. but worldwide that will benefit. It’s going to require tremendous expertise and you can’t get that overnight.”

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