RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss TCG-backed Night’s acquisition of Bottle Rocket Management, the combination logic, and growing M&A in the talent management landscape.
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Night bought Bottle Rocket Management.
It’s another digital-to-digital talent management acquisition.
RockWater served as financial advisor to BRM and its founder Chas Lacaillade. I therefore can’t go into deal specifics due to the NDA between our companies.
Let’s start with deal kudos and a personal note…
First, a BIG congratulations to Chas Lacaillade, BRM’s founder and a close friend of mine.
I first met Chas at Wurstküche in Venice CA, in a group outing orchestrated by our mutual friend Matt Messinger. This was around 2015 / 2016, when Chas was just starting BRM after leaving Fullscreen, an early YouTube MCN. During this timeframe I was also at an early YouTube MCN (Big Frame / Awesomeness), so there was a lot of shared history between us.
I remember walking up to our inside dining table, and immediately noticing Chas’s engaging handshake and vibrant personality. He was high-energy, bantered well, a fellow surfer, and excited to build his LA digital network and new talent co. After dinner, I was designated driver and dropped Chas off at his Venice apartment – as he walked out of my car, I was left with a clear mental imprint that Chas was a unique and special guy.
We became friendly and intermittently shared industry notes, but honestly don’t remember spending much time together over the next couple years. That changed in 2017.
I had just left Big Frame / Awesomeness to build a creator x media advisory business, now known as RockWater. That fall I updated Chas on my newco plans, I think over a coffee at Amelia’s cafe in Santa Monica (RIP). He immediately leaned in. Chas was excited for me, and made an unsolicited introduction to one of our earliest and largest clients, a content innovation division of YouTube / Google (shout-out Mary Healy).
Chas’s support was unexpected since we weren’t very close. But I was a first-time founder, and found his encouragement invigorating!
Chas has a zest for life, creator economy, and entrepreneurship. And particularly for peers and talent with ambition, positivity, and a strong moral / business code. Over the last decade I’ve observed this first-hand across numerous ski trips to UT and Canada, near-daily business chats and texts, and various life intersections.
I believe these characteristics are a unique driver of Chas’s success. I know many other peers who have benefitted from Chas’s business partnerships and support. On top of all that, Chas is also a shrewd operator and willing to make big bets, but is always thoughtful about mitigating his downside. Putting this all together, it’s clear why Chas was one of the earliest influencer reps from the YouTube MCN vintage to strike out on his own, generate early and big revenue wins for his talent clients, and build a lean but high-performing talent management company.
It’s therefore awesome to see Chas pick a strategic partner in Night that aligns with his plan for future growth and improved client servicing. Over the years I know that Chas, like many other OG digital management co founders, got a lot of inbounds from potential buyers and strategic partners. But the proposed opportunity and the timing was never right. That clearly changed for Chas in 2024 as deal talks with Night picked up. Chas is the type of operator who moves very quickly when he sets his mind to something and an opportunity feels right. He worked very quickly to get himself a great deal.
I’m pumped for him, and rooting for him and his team’s continue success in this next career chapter.
Of note, I find these deal moments to be unique opportunities to reflect back on longstanding industry friendships, and celebrate how my industry peers achieve great personal and business wins, and also meaningfully change the creator economy landscape. I really enjoy sharing these stories, and being able to sometimes play a supporting role through my advisory business.
To learn more about Chas’s personal story and career arc, there are some more story gems from our podcast interview back in 2020.
Aright, let’s get to the deal specifics and analysis…
—TARGET: Bottle Rocket Management—
OVERVIEW
- Talent management firm for digital content creators
- Founded 2015 by Chas Lacaillade
- Bootstrapped, no outside capital
- Focus on YouTube creators
- Reps ~40 talent clients
- Based in Austin, TX
TALENT HIGHLIGHTS
- Austin Evans
- BroScienceLife
- JerryRigEverything
- UrAvgConsumer
—BUYER: Night—
OVERVIEW
- Next-gen representation platform for artists
- Founded 2015 by Reed Duchscher
- 75-100+ team per LinkedIn
- Reps 100+ talent clients
- Based in Austin, TX
BIZ UNITS
- Talent – management, focused on digital creators being entertainers and entrepreneurs
- Studios – content studio, helps digital creators create and package shows for TV, streaming
- Labs – venture studio, pairs operators with creators to build companies e.g. Feastables
- Capital – TCG-backed fund to invest in / acquire profitable creator-led businesses
- Ventures – early stage venture fund, focused on tech
OPERATING HIGHLIGHTS
- Reps world’s largest Twitch streamer, Kai Cenat
- First manager of MrBeast, helped catapult his growth
- Launched Feastables in 2022, est $100M+ 2024 revenue
CAPITAL MARKETS HISTORY
- 2022 raised an est high 7 to low 8 figures from TCG
- 2022 raised $100M from TCG for Night Capital
- 2023 bought mgmt co LFM
- 2024 bought The Roost Podcast Network
—DEAL DETAILS—
OVERVIEW
- Announced 11.25.24
- Deal terms undisclosed
DEAL ORIGINS
- Night and BRM leadership have known one another for years
- Lacailade and Night President Ezra Cooperstein both worked at Fullscreen, an early YouTube MCN
VALUE PROP
- Bring a top digital manager into Night’s leadership team
- Deliver larger and more exciting opportunities to BRM clients
- Scale talent roster and offerings for Night’s brand and client partners
- Scale Night’s seasoned digital talent team via BRM team additions
- More leverage to recruit more digital-native clients
POST DEAL OPS
- Lacaillade becomes a VP of Digital at Night
- Will work alongside other VPs incl John Nelson, founder of LFM
- BRM team will integrate into Night
WHAT ELSE I FIND INTERESTING & DEAL INSIGHTS
Background on M&A rollups in the digital and talent representation space…
The talent M&A hits keep on coming!
Just this past week Live Nation announced the purchase of a majority stake in Timeline, an LA-based influencer management company, and the day prior Crestview-backed Gersh announced the acquisition of You First, a Madrid-based sports representation firm.
And these two deals are on top of Night announcing its acquisition of Bottle Rocket last week, a few days before Thanksgiving!
The deal activity is part of a talent rep consolidation trend I’ve written about extensively. It’s thus a good time to revisit an excerpt from my analysis on TPG-backed Initial Group buying Grandview. I discuss the origin, market opportunity, and deal activity around talent management rollups, and update the data for these recent deals.
What stands out in this recent M&A is how the buyer landscape for talent rep cos is evolving. We’ve seen buyers take many forms, from large traditional agencies and studios to digital publishers and PE-backed newcos (I explain more below). These 3 recent acquisition signal that existing talent rep co’s are being the most aggressive buyers, though I’m curious to see how this shakes out in 2025.
We expect to see a lot more activity in the new year, which will include some of the sell-side M&A processes we’re currently preparing our clients for.
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From my Initial Group / Grandview M&A analysis on 11.1.24…
There’s been lots of consolidation and capital flows into digital and influencer–focused marketing agencies and platforms. From Publicis buying Influential for $500M to Stagwell buying Leaders, with both deals announced in July 2024. This dealmaking activity builds upon much more M&A this year, and back to 2022.
I discuss more of these marketing and talent agency deals on our blog.
There’s also been many capital flows into talent representation companies, with talent agencies in particular commanding the most investor and acquirer interest dating back to 2010.
Marquee talent agency deals since 2022 include:
But now there’s another trend emerging.
There’s an increasing amount of consolidation amongst talent and influencer management companies. Here are some recent capital flows in the space (not an exhaustive list)…
Based on this deal activity, my observation is that there’s been more deal volume, in terms of total # of deals, for influencer management companies. In contrast, I believe the total deal volume by total aggregate enterprise value, is higher for traditional management companies, like TPG’s acquisition of Untitled and Grandview, and Wasserman’s acquisition of Brillstein.
This is unsurprising, as these traditional management companies have been around for multiple decades and are more established than many of the digital-native management companies. The legacy Hollywood firms have large traditional talent rosters, and diversified and scaled revenue from film / TV, streaming, touring, endorsements, book publishing, merch, and more.
Interestingly, many of these traditional management companies are still independent, and the landscape is very fragmented vs the traditional Hollywood agency landscape…I think of management companies like Entertainment 360 (fka Management 360), Emerson Collective-backed Anonymous Content, LINK Entertainment, The Gotham Group, Authentic Talent, Ron Burkle-backed LBI Entertainment (Rick Yorn), and many more. Another large management company is 3 Arts, which is owned by Lionsgate – the studio bought a majority stake in 2018 and then increased its stake in 2023. For the right price, I can see 3 Arts also being an acquisition candidate.
In contrast to the traditional Hollywood managers, the digital-native management firms are a much newer vintage. At the oldest most have been around for likely no more than a decade (most are under 5 years old), and the majority of their revenue is from brand partnerships.
But similar to the traditional management companies, the influencer management company landscape is also highly fragmented. The majority are subscale with about 1-3 employees and doing 6 figures in net revenue, but there are still a few scaled and independent firms left who are doing 7-figures of EBITDA and 8-figures in revenue.
From my personal founder convos (I talk to multiple owners every week), I don’t know any independent digital management firms doing 8-figures in EBITDA yet.
One exception may be TCG-backed Night which had the benefit of taking a share of MrBeast’s massive brand partnerships and CPG businesses like MrBeast Burger and Feastables, but TBD what the pro forma P&L looks like upon MrBeast’s departure as a client of the firm. I’d expect Night’s continued commission of any deals done when MrBeast was an active client, but TBD if the CPG commissions are structured as a % of equity ownership, and/or a share of CPG company revenue and profits. My guess is more likely a % of equity so the CPG newcos can continue to reinvest in growth, so we wouldn’t see the EBITDA impact just yet in their P&L, but I’m just speculating here.
(DM me to prove me otherwise, would love to hear some more 8-figure EBITDA digital manager success stories!)
But overall, despite the smaller scale, the top-performing digital-native representation firms are growing very quickly. There’s a lot of headroom to grow into considering the broader trend that audiences are spending the majority of their time in digital environments, and revenue flows to where audiences spend their time – we’re seeing that in influencer ad spending within social video, one of the fastest-growing categories in digital ad growth, and in the overall migration of linear TV dollars to digital.
Another growth driver is that influencers and creators are the modern business builders, and are rapidly diversifying their businesses beyond just brand partnerships. Based on lots of creator entrepreneurship experiments and learnings over the past few years, I expect to see more *successful* creator-led business-building going forward, with meaningful profit and liquidity events.
Putting all this together, I can see the top performing digital management companies getting to 8-figures of profitability by 2026.
For traditional Hollywood management co’s, I believe many of the top performers I listed above are already at 8-figures profitability, but their growth is slower relative to the digital rep firms. This explains why many have been trying to build a digital practice, either by hiring digital-focused managers (like Brillstein did with Seth Jacobs), or by exploring digital management acquisitions. There’s not a ton of M&A data points here of traditional managers buying digital managers, but one good M&A comp is Propagate-owned Artists First (formerly Principato-Young) buying a stake in Select Management in 2020, with an option to continue growing its ownership stake over time.
Uniquely, there’s been more M&A precedent of traditional Hollywood agencies acquiring digital management co’s, like UTA buying DBA in 2019, and Wasserman buying J1S in 2023 and Long Haul Management last month (our team advised on the deal). I expect these types of traditional agency to digital management M&A more common since digital managers have a more hybrid talent agent / manager role vs traditional Hollywood managers – the bottom of my analysis here explains this dynamic in more detail.
Based on the above market dynamics, I believe that the talent management landscape is primed for a rollup, and we should expect to see much more deal activity going forward.
I’m curious to the various approaches that different buyer groups will take;
- TPG-backed Initial Group is focused on traditional Hollywood managers, but is also eying digital firms.
- Coral Tree-backed Loaded bought GG talent and is looking for other digital acquisitions, and my guess is that with a bit more scale, they could exit to a firm like Initial Group. TCG-backed Night also falls into this bucket, but unclear if they’re seeking a near to medium term exit, or if they’re working to build something much bigger over the longer term. PE investors typically want to see an exit within 5 to 10 years, but traditional talent rep owners are known to build and operate for multiple decades. Curious to see how this shakes out for digital-focused talent reps.
- PE-backed Hollywood agencies like UTA / Endeavor / Wasserman / CAA / Gersh see the landscape for all digital reps getting more competitive, and will likely ramp up their digital management co dealmaking (which we directly observed in our sell-side M&A client work this year, in advising on the sale of Long Haul Management to Wasserman).
- Digital publisher TheSoul bought digital management co Underscore, and is open to other acquisitions. The thinking is that access to talent in order to accelerate social video content creation and brand partnerships has strategic value for publishers.
- Similar to my above note, another class of buyers could be studios and production companies, inspired by Lionsgate’s acquisition of 3 Arts and Propagate’s acquisition of Artists First…though I think there’s a good chance these could get spun off as PE-backed consolidation heats up
- The Live Nation / Timeline deal signals yet another buyer group, in diversified entertainment companies. Live Nation is a large, publicly-traded live entertainment business, and has an artist management division called Artist Nation. But, this is the first time Live Nation is taking a meaningful step to bolster its management offerings for creators and influencers. Since talent are increasingly critical to the success of any new content / entertainment / brand partnership / newco, expect to see increasing diversity of talent buyers. This deal and headline has a chance to break the seal wide open for a massive new array of talent buyers starting in 2025, definitely worth watching.
Overall, I think capital will flow from traditional Hollywood to digital, and not the reverse. But TBD how else these deals might take shape? Will be fun to observe and learn!
To recap, these are the core deal value drivers:
- Traditional and digital management landscape is highly fragmented
- There are many synergies in combination (the intro of my article here captures most of the rationale)
- Historical precedent in PE investing in talent representation business models and earning good investor ROI
- Increasing deal activity in traditional and digital management businesses over last 12 months
Alright, that’s enough deal analysis for one week. There likely won’t be another M&A analysis next week due to my travels in NYC and Kentucky.
I’m the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.
DM me on LinkedIn or email me chris @ wearerockwater dot com
