Gersh Buys A3’s Digital & Alternative Teams
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss Gersh’s purchase of A3’s Digital & Alternative Teams, and how Gersh’s new PE backer Crestview signaled there’s more M&A to come.
Gersh Buys A3’s Digital & Alternative Teams
Gersh just bought A3’s digital and alternative divisions.
This is round 2 for Private Equity backer Crestview, which previously sold ICM to CAA.
Let’s beak the deal down, and what I expect next from Gersh…
🎯TARGET: A3 Artists Agency – Digital and Alternative Depts
- Hollywood talent agency w/ 9 divisions
- f/k/a/ as Abrams Artists, which was acquired in 2018 from founder Harry Abrams
- New leadership is Adam Bold, Brian Cho, Robert Attermann
- Rebranded in 2020 to A3 Artists, w/ new focus on digital, podcast, influencers
- Digital and Alternative depts are the acquisition target
- Jade Sherman runs digital, Alec Shankman runs alternative
- I estimate 175+ total A3 staff pre acquisition, w/ offices in LA, NY, UK
💵BUYER: Gersh
- 4th largest talent agency in world
- Founded 1949 by Phil Gersh
- 12 depts incl talent, literary, film finance, theater, commercial prod, endorsements
- Led by co-presidents Bob Gersh, David Gersh, and Leslie Siebert
- Crestview bought 45% in May 2023
- Gersh family owns other 55%
- Barely any history of M&A, bought lit agency in 2010
- ~300 employees in LA and NY
🤝DEAL DETAILS
- Price and structure undisclosed
- 1st M&A deal under Crestview ownership
- I expect portion in upfront cash (50 to 70%) + rest in equity of parent co
- Digital and Alternative divisions were profitable, I estimate 7 figures EBITDA
🤝POST-DEAL OPS
- 25 agents (incl 7 sr agents) and 45 other A3 staff move to Gersh
- Seeds new digital biz helmed by Jade Sherman, new Gersh senior partner
- Alt dept will be helmed by Alec Shankman, new Gersh senior partner, who will be working alongside existing Gersh senior agent and partner Debra Goldfarb
- 100 people will stay on at A3 in remaining 7 depts
💡DEAL RATIONALE
- Gersh doesn’t have a digital dept, yet its fastest-growing division for other talent rep firms
- Crestview backer wants to rapidly grow Gersh scale and modernize, M&A is fastest way
- Gersh existing clients also need digital-servicing
- Digital was Abram’s largest and fastest-growing dept
- Need for Gersh to expand offerings for brands, was behind peers like UTA, CAA
🤔What else I find interesting about the deal…
This builds upon more than 25 influencer representation M&A deals since 2019, and 12+ deals in 2023. We expect even more deal activity this year, since corp dev teams were overloaded in Q4 and are now coming back online to work towards their 2024 M&A mandate.
Of note, this isn’t Crestview’s first investment in talent representation. Crestview invested in ICM in 2019, buying ~50% of the business via a $150M stake, which implies a $300M valuation. EBITDA was reported to have grown 2.5x under Crestview ownership, which included doubling down on music and sports, and a focus on international growth, which led to the acquisition of a UK-based music agency in 2020.
Then in 2021, it was announced that ICM was being sold to CAA at a valuation of $750M, meaning Crestview had roughly doubled its money in just 2 years time. Not bad!
This highlights that Crestview is familiar with the space, knows how to drive inorganic growth, and also how to setup a successful exit.
Therefore, was no surprise that Crestview made a point to put in the press release that they want to continue growing in digital and sports media through M&A. That’s a strong bat signal to agency sellers that Crestview and Gersh are open for business.
(NOTE: I’ve gotten to know Crestview’s media investment team. They’re smart and straightforward dealmakers. A good addition to the talent space.)
And one last point on some drama that surrounded the deal…
It was reported that A3 CEO and President Brian and Robert wanted to block the A3 sale from going through, which was being spearheaded by chairman Adam Bold. They therefore sued Bold and A3 itself, purporting that Bold was spearheading a deal process without the consent of the other 2 firm leaders. And that the sales process and Bold’s actions over the past year would steer the remaining A3 business post sale into bankruptcy.
Of course, there’s always more to these deals than what’s reported.
Because the deal went through, it seems that Bold did in fact have the control rights to run and complete a sales process. And I don’t know the details here, but based on the lawsuit it seems that Brian and Robert wouldn’t have meaningful or any participation in the proceeds from the sale to Gersh, hence the attempt to block. So perhaps Bold previously bought out Brian and Robert’s control rights here, or Bold’s control was contracted in the original formation of A3 after the purchase and rebranding of Abrams Artists back in 2018.
Regardless of the actual details, Brian and Robert now remain at A3 without the highest-growing and most attractive agency assets. The buyer verse for the traditional talent divisions is much more limited. Curious to track talent and agent retention at the remaining A3 business, and if the parts will be sold off or merged with another agency. I hope they figure out a good result.
Of note, PE shops like Crestview are savvy dealmakers and know how to manage messy situations. Like navigating stakeholders with different wants and governance rights. These deal dynamics permeate all industries, but what always feels unique to Hollywood is the surrounding drama from exec squabbling and massive egos! Fortunately that doesn’t seem to be a turn off for smart money, as the capital continues to flow into the space (which we track extensively on our blog and in this newsletter). I do believe that this is a good overall trend for the digital and talent representation businesses, to help the industry mature and professionalize.
I’m the founder of RockWater Industries. We do financial and strategy advisory for media, tech, and commerce. From M&A and fundraising to consumer research and go-to-market planning.
DM me on LinkedIn or email me chris @ wearerockwater dot com
