One insider describes the books as a “fucking mess,” binding bids come in next few weeks
IMG, the world's leading sports management agency, is asking buyers to pay a sky-high multiple of 15 times its annual profit in its bid for a $2.5 billion purchase price, according to several individuals with knowledge of the bidding.
Forstmann Little, IMG's owner, is seeking that sum for a company that is a rare prize in the sports entertainment and media space, representing professional athletes and staging athletic events across the globe. The company also has a robust college sports marketing business. Still, an individual familiar with the bidding said IMG's 2013 financial results of between $150 to $175 million in ebitda (earnings before interest and tax) were surprisingly low to some considering the asking price, and another individual described the company's books as “a fucking mess.”
IMG and Forstmann Little declined to comment for this story.
Five bidders remain at the table after submitting non-binding bids this fall and getting a look at IMG's financials. The bidders are expected to submit binding bids in the next few weeks.
WME and its backer Silver Lake, Russian conglomerate Gazprom and the duo of Chernin Group and investment firm CVC are considered the most motivated bidders. The other two are the Carlyle Group with ICM Partners consulting on the deal and the private equity group Kohlberg Kravis Roberts (KKR).
At about $150 million in annual ebitda, the multiple sought for IMG is highly unusual for a media or entertainment property, especially one that is mature. Those kinds of multiples are more commonly seen among companies with dynamic growth trajectories. That makes it more likely that a buyer will emerge from among those looking to buy a seat at the entertainment business table, like the Russian conglomerate Gazprom.
Speculation has swirled around Hollywood talent agency CAA's withdrawal from the bidding. Several insiders said that CAA had sought outside financial partners, including Tony Ressler's Ares Management, which passed on the opportunity. But ultimately the agency concluded that IMG was far overpriced for its value.
Also read: CAA Signs Tim Tebow For All His Business
Knowledgeable individuals told TheWrap that after seeing the company's financials several CAA partners cooled on the purchase, which would dilute their ownership stakes and transform the agency. IMG is far larger, and operates several businesses that CAA is not involved in.
“The guys have ownership, make money and this could fuck it up,” the individual said. ”Some of the partners decided ‘we don't need to do this.'”
CAA was also unenthusiastic about opening up its books to IMG since they are competitors in areas such as on-field talent management, media rights and corporate consulting. The feeling was mutual.
Any buyer will be taking on a significant amount of debt and will be paying a large multiple on IMG's annual profits. The individual said that IMG is advertising its 2013 profits as around $200 million, but two different individuals said the real figure sits between $150 and $175 million.
CAA partner Richard Lovett remained eager to buy IMG since he has long admired IMG founder Mark McCormack. McCormack died in 2003, and Forstmann Little bought the company the following year.
When Lovett launched CAA Sports in 2006, he hired a number of prominent IMG agents and has since built the agency into one of the most prominent athlete representation firms. Its client list includes Peyton Manning, Cristiano Ronaldo and Chris Paul.