Private equity firm Forstmann Little & Co. started prepping IMG for a sale last year, as Variety reported in December. Forstmann, which bought IMG in 2004 for more than $700 million, is expected to select an investment bank to help them shop the asset soon.
The firm has strong ties with Goldman Sachs, with whom it has been holding discussions for several months. It’s understood Forstmann has also been in discussions with one other investment bank about the sale. LionTree, launched in July by former UBS Americas investment banking chief Aryeh Bourkoff, and UBS advise CAA on acquisition opportunities in general.
CAA declined to comment. An IMG deal would be the largest acquisition in CAA’s 38-year history. Observers say the sports event management and marketing giant could fetch at least $2 billion.
CAA is already one of the biggest agencies in the sports world, and had been eyed as a likely contender since rumblings of an IMG sale first surfaced. CAA spent big bucks several years ago to hire a handful of top IMG talent reps as the agency expanded its sports biz. They have also taken a number of big-ticket IMG clients including ESPN analyst Kirk Herbstreit.
IMG is seen as a marquee asset in the sports event world. Forstmann Little, which acquired IMG in 2004, quietly shopped the asset last year for about $3 billion. Company is said to be on track for at least $200 million in cash flow in 2013, according to industry observers.
There has been speculation that CAA’s private equity backer TPG would pursue an acquisition of IMG as part of a strategy to eventually spur a public offering for the agency. A pair-up with IMG could help CAA reach a scale that investors would find attractive for an IPO. Sources close to the situation caution that talk of an IPO remain highly speculative.
IMG’s global operations include robust sports marketing, event management, licensing, fashion, representation and production businesses. It handles retailing and licensing for the All England Lawn Tennis Club, which organizes the Wimbledon tennis tournament, and produces high-end golf, soccer, rugby and cricket events around the world, among its other sports activities. Its IMG College wing works with the NCAA and others on the lucrative biz of marketing, ticketing, licensing and brand management for more than 200 college sports properties in the U.S.
Although IMG also handled major sports stars, talent representation accounts for less than 10% of its cash flow. Sources say CAA sees IMG’s heft in college sports and international event production as a natural fit with its roster of athlete clients.
CAA launched its sports division in 2006 and began by building its athlete representation business. It currently reps more than 800 athletes and also runs a property sales and sponsorship division with clients that include Madison Square Garden, the San Francisco 49ers and London soccer club Chelsea FC. Evolution Media Capital, an affiliate of CAA, does media advisory work on broadcast rights and other deals. CAA also formed CAA Eleven last year to represent the centralized media rights for UEFA, the governing body of European soccer.
WME and the Wasserman Media Group are also seen as likely contenders for IMG.
Mark McCormack famously launched IMG in 1960 through a handshake deal with golf legend Arnold Palmer and is credited with numerous innovations in the sports biz, along with helping to popularize golf as a sport. McCormack’s death in 2003 spurred much speculation about the future of the company, which increased with the death of Forstmann Little topper Ted Forstmann in November 2011. A sale of IMG would allow a number of company veterans to cash out their stakes in the firm.
As the economy continue to recover from the 2008 financial crisis, some fiscal observers have expressed optimism that financial markets have more of a capacity for large marquee assets. Guggenheim Partners’ purchase of the L.A. Dodgers last year showed an appetite and support for the right kind of asset. But the Anschutz Co.’s decision in to pull trophy asset AEG last month amidst rumblings that the rumored $8 billion to $10 billion price tag was too high demonstrated a threshold for such transactions.
LionTree in recent months has advised on a number of big-ticket transactions. It aided Liberty Media in its acquisition of a stake in cabler Charter Communications in March. It also worked on behalf of Content Partners during its recent acquisition of a 50% stake in the “CSI” franchise from Goldman Sachs.