Chris Silbermann spent most of this year driving toward the handshake agreement reached Friday to transform ICM into a partner-owned percentery, six years after it became the guinea pig for private equity investments in Hollywood’s rep business.
The ICM prexy spent months persuading the agency’s majority owner, Rizvi Traverse Management, that ICM’s long-term viability hinged on its ability to keep top agents in the fold and motivated. In the percentery world, motivation is doled out to key players in the form of partner status, huge bonuses or an equity stake (even if only a sliver) in the agency.
ICM hasn’t been able to offer those perks because the ownership has been so closely held among Birmingham, Mich.-based Rizvi Traverse and the agency’s top echelon, including Silbermann and ICM’s longtime chairman-CEO, Jeff Berg. Once the restructuring deal is finalized, Silbermann’s challenge will be to keep ICM competitive after making what amounts to a big bet on the agency as it stands today.
Observers said ICM could become more attractive as a merger or acquisition target now that there’s no longer an outside investor to contend with. However, industry sources said ICM quietly tested the waters for a possible deal with one of its larger rivals earlier this year and found no takers (this scenario has been denied by ICM insiders, however).
The campaign for a restructuring began early this year, as Silbermann stressed the need for the agency to have more flexibility in compensating its biggest contributors and rewarding its up-and-comers.
By multiple accounts, it was slow going for Silbermann with Rizvi Traverse prexy Suhail Rizvi and chief financial officer Ben Kohn, who runs the company’s L.A. office and has minded its investment in ICM. (Rizvi Traverse also has investments in Summit Entertainment, Playboy magazine, Facebook and Twitter.)
Berg was said to be less intent than Silbermann on getting a deal done quickly with Rizvi until recently, when ICM began to lose prominent agents, including four defections to UTA.
The internal drama spurred endless industry chatter about a boardroom battle for control raging between Berg and Silbermann. Knowledgeable sources have consistently downplayed the talk of extreme discord between the two. Sources also emphasized that the pact disclosed to ICM staffers on Friday (without much detail) would not have happened had Berg not been onboard, given his ownership interest in the agency, where he has worked for more than 40 years.
Berg orchestrated the 2005 deal with Rizvi Traverse that gave the agency an estimated $75 million in recapitalization coin. It was a first in the modern era for a Hollywood talent agency and a private equity concern. The Rizvi war chest allowed ICM to acquire Broder Webb Chervin Silbermann in 2006, bringing its powerhouse lit clients and its respected management team into ICM, which desperately needed the new blood on both fronts.
The investment has by all accounts been a good one for Rizvi Traverse, as ICM has had a windfall of TV packaging-fee profits from the off-network success of shows including “Two and a Half Men,” “The Big Bang Theory,” “Modern Family,” “House,” “Criminal Minds” and “Grey’s Anatomy.”
Details of the restructuring deal remain murky, but it appears that Rizvi Traverse will cede some of its equity interest in ICM in order to allow Silbermann and Berg to bring more of its top performers into equity-owner positions.
The deal was characterized by those in the know as a “transfer of ownership” to the new partnership rather than a formal management buyout, and it was emphasized that no money will change hands in the transaction. Because of that, it’s expected that Rizvi Traverse will hang on to a significant chunk of ICM’s most lucrative receivables (“Big Bang Theory” alone will generate tens of millions of dollars for the agency in the coming years through its syndie licensing pacts).
The number of agents in line for elevation to partner status is still unclear (one source said “more than two and less than 100”). It will encompass heavy hitters from across the agency’s key divisions: TV, film, publishing, legit, marketing, concerts and touring. Berg’s and Silbermann’s titles are likely to change under the partnership structure.
Silbermann is said to see the reorg as laying the groundwork for organic growth. The hope is that the partnership structure will bolster the agency at the top and give new incentive to its younger ranks.