Endeavor Goes Private for $13B + Valuation Multiples
April 12, 2024 by Chris Erwin
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss Silver Lake’s $13B buyout of diversified media co Endeavor, how Endeavor grew through aggressive M&A, its cap table history, the deal value drivers, and an analysis of valuation multiples.
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Silver Lake will take Endeavor private for $13B.
Just 3 years after going public in 2021.
The deal follows CAA being bought by Artemis for $7B in 2023.
Let’s break it down…
🎯TARGET: Endeavor
- A global sports, entertainment, and talent management company
- Founded 1995 by Ari Emanuel, Rick Rosen, Tom Strickler, and David Greenblat
- Rebranded to Endeavor in 2017: WME is talent agency, IMG is sports agency
- Launched Endeavor Content in 2017 from film financing, TV scripted, content advisory units
- Has 51% stake in TKO, parent co of merged WWE-UFC
- $6B of 2023 revenue, up 13% YoY
- $557M of 2023 net income, up 73% YoY
- $1.21M of adj EBITDA, up 4.5% YoY
- 10,000 team members
🤔HOW ENDEAVOR GREW THROUGH M&A
- 2009 merged with William Morris Agency to create William Morris Endeavor
- 2013 acquired IMG for $2.3B, and 49% of Droga5 (later sold to Accenture for $233M)
- 2015 acquired Global Esports Mgmt, Pro Bull Riders, and Miss Universe (from Trump) (later sold to JKN Global for $14M)
- 2016 acquired UFC for $4B, and RWSG literary agency
- 2017 acquired Bloom, a film finance co
- 2021 acquired OpenBet for $800M
- 2023 acquired Asylum Entertainment, and Ross Yoon Agency
- 2023 merged WWE with Endeavor-owned UFC, created new public co
📝ENDEAVOR CAP TABLE HISTORY
- 2012 sold 31.25% stake to Silver Lake for $250M
- 2016 Softbank and Fidelity invested in the rebranded WME-IMG
- 2016 formed JV for China growth w/ Sequoia, Tencent, and FountainVest
- 2019 failed IPO
- 2021 IPO’d on NYSE, Elon Musk joined board
- 2021 sold 80% of Endeavor Content to CJ ENM for $785M (mandated by WGA compliance)
- 2023 formed TKO Group Holdings via merger of WWE and Endeavor-owned UFC
💰BUYER: Silver Lake
- One of world’s largest PE firms
- $101B assets under mgmt
- Founded 1999 by Jim Davidson, Glenn Hutchins, Roger McNamee, David Roux
- Original investment mandate was mature technology co’s, 1st fund was $2.3B
- In 2012 did 1st minority investment into WME
- Backed WME’s 2013 purchase of IMG, and then UFC in 2016
- Co-CEO Egon Durban has close ties to Endeavor leadership
- 189 employees per website
🤝DEAL DETAILS
- Silver Lake buying 100% of shares it doesn’t already own
- Silver Lake previously owned 37% of outstanding shares, 71% of voting shares
- Endeavor stockholders get $27.50 in cash, a 55% premium to its unaffected share price of $17.72 on 10.25.23 (day before announcement of “strategic review”)
- Deal values equity at $13B, and seems $5B of debt is rolling over
- Est $4.6B equity premium to existing stockholders
- TKO Group Holdings not part of deal, will remain public
- All Endeavor + TKO valued at $25B, per Silver Lake
- Expected to close 1Q 2025
- $289M breakup fee if Endeavor accepts other proposal
- $705 termination fee is Silver Lake can’t close
💡DEAL RATIONALE / SYNERGY
- “Maximize value for all of Endeavor’s public stockholders”
- “Unlock and invest in growth opportunities ahead as a private company”
- aka the public markets didn’t ascribe high value to non UFC assets, so sum of parts will be greater than the whole
💸POST-DEAL OPS
- Ari stays CEO of newly-private Endeavor
- Whitesell will stay on Endeavor board, Shapiro stays on as prez
- Various non-core assets will be sold off to highest bidders
- TKO “will continue to benefit from its connectivity to Endeavor’s expertise, relationships and significant capabilities”
- Silver Lake committing $250M to exec chairman Patrick Whitesell’s new media co / investment vehicle
🚀EXEC COMP & BONUSES
- Overall, the 3 Endeavor execs of Ari, Patrick, and Mark are making out VERY well
- There are many forms of compensation as part of deal that will significantly enrich these 3 execs (who are already very well off), from salary and perks (like private jets) to profit sharing and bonuses for future Endeavor asset sales
- Due to my limited time getting this report out this morning, I’ll defer to the extensive existing coverage out there on all the detail here. Puck and Variety do a great job covering it, go check out their publications!
Now, some valuation analysis…
See data table below, and my explanation that follows.
| ($Ms) | 2023 | % of Total | 2022 | YoY Growth |
| Revenue | ||||
| Owned Sports Properties (UFC, WWE) | $1,816 | 30.5% | $1,332 | 36.3% |
| Events, Experiences, & Rights | $2,173 | 36.5% | $2,192 | -0.9% |
| Representation (WME, IMG) | $1,544 | 25.9% | $1,512 | 2.1% |
| Sports Data & Technology | $470 | 7.9% | $261 | 80.1% |
| Eliminations | -$43 | -0.7% | -$29 | 48.3% |
| TOTAL | $5,960 | 100.0% | $5,268 | 13.1% |
| Adj. EBITDA | ||||
| Owned Sports Properties (UFC, WWE) | $827 | 68.0% | $648 | 27.6% |
| Events, Experiences, & Rights | $228 | 18.8% | $295 | -22.7% |
| Representation (WME, IMG) | $391 | 32.2% | $470 | -16.8% |
| Sports Data & Technology | $63 | 5.2% | $48 | 31.3% |
| Corporate | -$293 | -24.1% | -$297 | -1.3% |
| TOTAL | $1,216 | 100.0% | $1,164 | 4.5% |
| Adj. EBITDA Margins | ||||
| Owned Sports Properties (UFC, WWE) | 45.5% | 48.6% | ||
| Events, Experiences, & Rights | 10.5% | 13.5% | ||
| Representation (WME, IMG) | 25.3% | 31.1% | ||
| Sports Data & Technology | 13.4% | 18.4% | ||
| NA | NA | NA | ||
| TOTAL | 20.40% | 22.10% | ||
| Enterprise Value Calc | ||||
| Equity Value | $13,000 | |||
| LT debt (incl current portion) | $5,028 | |||
| LT operating leases (incl current portion) | $364 | |||
| Cash & equivalents | -$1,167 | |||
| TOTAL | $17,225 | |||
| LTM Multiples | ||||
| 2023 Revenue | 2.9x | |||
| 2023 Adj EBITDA | 14.2x | |||
| Forward Multiples | ||||
| 2024 Revenue | $7,300 | |||
| 2024 Revenue Multiple | 2.4x | |||
| 2024 EBITDA (assumes 2023 margin) | $1,489 | |||
| 2024 EBITDA Multiple | 11.6x | |||
| CAVEAT: This is a quick & dirty valuation analysis. I did not scrutinize financial statements for adjustments like non controlling interest in TKO (seems Endeavor will still own 51% of public co post buyout), minority interests in other co’s, other LT liabilities, the co’s Adj. EBITDA definitions, what debt and equity interests are being rolled over, etc. I just don’t have the time this week, but there are any good Wall Street Research analyst reports to reference here, particularly as more info about the deal is released | ||||
Some key takeaways from the above data:
- First, a note on info sources and caveats → My analysis is based on company SEC filings and public reporting, and there’s an important caveat I note at bottom of chart. In particular, when doing the Enterprise Value and adj EBITDA calcs, there’s an adjustment for non controlling interest (NCI) in TKO, parent co of UFC-WWE, and other non-100% owned businesses, that could materially impact valuation multiples. There’s a NCI expense on the P&L, but requires more scrutiny. I also assume that Endeavor will still own 51% of public co TKO after going private. Overall, Endeavor and this deal are complex, making the deal analysis challenging, so I invite crowdsourced feedback here…I want to get this right and you all may have some critical feedback here.
- The owned sports properties biz is clearly the highest growth and margin biz segment (36% YoY rev growth and 46% profit margin for 2023). This biz seems to be supported by a large events services business that is slower growth but still profitable at a respectable 11% margin
- The representation business grew slowly YoY at 2.1%, and profit margin is worsening (declined 6 percentage points YoY to 25%). Likely significantly impacted by the writer and actor strikes, but still down significantly from $2B in 2021 (21%), so there are some issues to address in that biz (there’s more detail you can parse through in the MD&A section of the 10K). Though readers of our newsletter know the broader talent representation business is growing, particularly for sports and digital-native creators, and that buyers are putting a premium on representation companies
- Further, Endeavor’s representation biz is 25% of total revenue, and 32% of adj EBITDA. Outside of owned sports properties, the rep biz is the 2nd highest margin biz of the 4 segments. And it likely has much room for improvement when comparing to 2022 performance and its private peers, and when considering the macro market tailwinds I mentioned above. Again, more rationale for why Silver Lake sees a premium and the rationale in taking the company biz private
- My very quick and dirty analysis shows the buyout is at an LTM revenue multiple of 2.9x, and adj EBITDA multiple of 14.2x. That would be really high for a representation biz, but remember that the results include consolidation of the high-growth and high-margin sports properties biz. I don’t have the data to do a sum of the parts analysis for how Silver Lake is valuing the different biz lines, but my guess is that they’re putting a mid to high single digits EBITDA multiple on the rep biz, willing to pay a decent multiple relative to precedent rep company transactions, since Silver Lake assumes Endeavor’s rep biz is low margin and has significant room to grow
- Lastly, this deal comes 5 months after Endeavor kicked off a “strategic review” of its assets for how to boost shareholder value. Those banker and PE teams likely have not slept much since Halloween 😉
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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
