TPG Buys Grandview, its 2nd Deal in Talent Mgmt Rollup

November 1, 2024 by  Phillip Ruzol

RockWater Roundup

RockWater analysis to make you a better investor and operator. Today we discuss TPG’s acquisition of Grandview, including the deal value prop, planned combination with Untitled, and increasing consolidation of talent management companies.

 

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TPG-backed Initial Group bought Hollywood management company Grandivew.

It’s the 2nd deal in a talent management M&A rollup, following the purchase of Untitled Entertainment back in June.

Let’s break it down…

 

💰SELLER: Grandview

  • Traditional Hollywood talent and literary management company
  • Founded in 2014 by Jeff Rosen, Matt Silver, Brian Kavanaugh-Jones
  • Strategic partnership with QCODE, a podcast network and audio studio
  • Primarily reps filmmakers
  • Based in LA

 

💎Corporate History

  • 3 founders met while working at CAA in film lit / finance / sales from 2006 to 2010
  • Formed Grandview in 2014: Rosen and Silver focused on talent mgmt, BKJ on film prod / packaging
  • In formation of newco, Rosen left CAA, Silver contributed his talent mgmt co Fourth Floor, and BKJ stayed on as prez of his prod co Automatik 
  • Automatik merged with Range Media in 2023, Grandview stayed separate

 

🌟Talent Roster Highlights

  • “Smile” writer-director Parker Finn
  • “Rebel Ridge” writer-director Jeremy Saulnier
  • “Top Gun: Maverick” director Joseph Kosinski
  • “Longlegs” writer-director Osgood Perkins
  • “Mr & Mrs Smith” and “Atlanta” director Hiro Murai
  • “Ghost in the Shell” director Rupert Sanders

 

🤝BUYER: INITIAL GROUP

  • New global talent and entertainment company
  • Launched when TPG bought Untitled in Jun 2024 from Boat Rocker
  • Wants to “attract the most visionary representatives in the entertainment industry”
  • Goal to acquire, invest in, and build a diversified global biz centered on talent mgmt, representation, and adjacent verticals
  • CEO is Michel Pratte, former President of Boat Rocker
  • COO is Eric Taitz, former EVP Corp Dev / Strategy of Boat Rocker

 

💸BUYER OWNER: TPG

  • Global investment firm
  • $224B of AUM
  • Founded 1992
  • Strategies incl PE, impact, credit, real estate, and market solutions (aka a hedge fund)
  • Investment led by TPG Growth, its middle market / growth equity platform
  • Experience in media / entertainment, talent mgmt, music
  • Made > $2.5B selling CAA to Artemis in 2023

 

🎖️TPG MEDIA PORTFOLIO

  • Calm
  • CAA
  • DirectTV
  • Entertainment Partners
  • Fandom
  • MusixMatch
  • Spotify
  • Initial Group (Untitled + Grandview)

 

🔎DEAL DETAILS

  • Announced 10.10.24
  • No deal details were disclosed (I give some valuation thoughts below)

 

✨DEAL VALUE PROP

  • Bolster Untitled’s efforts in lit representation
  • Rapidly expand overall talent manager and client relationships
  • Untitled has larger scale, known for volume of talent relationships – Grandview is smaller but has high-profile talent
  • Combine Untitled w/ a “robust and exciting culture that [Grandview] have fostered and that has attracted some of the most forward-thinking representatives over the past decade”

 

💡POST DEAL OPS

  • Combined actor-focused talent mgmt co will retain Untitled name
  • Grandview co-founders will be managing partners alongside Untitled cofounders, Jason Weinberg and Stephanie Simon
  • 3 partners will join the 6 partners of Untitled
  • Will operate under Initial Group

 

WHAT ELSE I FIND INTERESTING & DEAL INSIGHTS

 

Background on M&A rollups in the digital and talent representation space…

Two weeks ago I wrote about the origin, market opportunity, and deal activity around talent management rollups in my newsletter about Whalar buying Sixteenth.

The context remains important and timely, so including it immediately below – I updated the analysis based on the last two weeks of deal activity, and my additional reflection on the current state of the talent management companies, and how I think the consolidation activity will shake out. Additional Grandview deal analysis and insights will follow.

…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 and prominent 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.

(NOTE: I had forgot to previously include Grandview on the above list, which had been searching for a buyer for the last few years. In Sep 2022 it was reported that the company was in advanced deal talks with Anonymous Content who initially expressed interest in buying both Grandview and sister company Automatik, but no deal was ever consummated.)

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 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.
  • PE-backed Hollywood agencies like UTA / Endeavor / Wasserman / CAA / Gersh could 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)
  • 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

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

 

My valuation estimate…

No deal details were disclosed, so let’s do some speculating based on market rumors, my past deal analysis archives, and publicly available info. 

Matt Belloni of Puck news reported a $65-70M enterprise value and an EBITDA “multiple in the teens” for Grandview.

The enterprise value feels high to me. 

In my blog post about TPG buying Untitled, I estimated a $123M enterprise value and a 2023 LTM 12.6x EBITDA multiple. 

(NOTE: I was able to do that valuation analysis since the seller Boatrocker was a public co and there was a lot more info on Untitled’s financials and deal details. In contrast, Grandview is a private company and no deal details were disclosed.)

Untitled was founded in 1999, 15 years prior to Grandview, giving it a lot more operating history and momentum to build from. Further, 3 partners of Grandview are joining Untitled’s 6 partners, and each firm has 2 managing partners – using very directional math, I assume that Grandview has 50% or less employees than Untitled. Also, Untitled had the benefit of Boat Rocker support since its acquisition in 2019. 

I’d therefore be surprised that within ten years, Grandview built a company that was half the financial size of Untitled, which had a 15 year head start. Even though Grandview is known for having some very high-profile talent, Untitled is known for a high-volume roster with notable stars. 

So what does that mean for actual deal size?

I really don’t know, but maybe it was closer to the $30-50M range – maybe the earnout got the deal closer to Puck’s reported range, and I’m confident the deal included a significant earnout component. 

In terms of valuation multiple, my gut and experience tells me that the EBITDA multiple was 10x or above, but I don’t have any deal detail to go off here..

 

Should we expect more M&A from TPG-backed Initial Group?…

Yes. 

The press reports rumors that Initial Group is in talks with other firms for M&A. Also, part of the newco’s thesis is to acquire not just talent representation businesses, but also adjacent businesses that service talent, content buyers, and brand marketers. 

Also, buying a couple companies where the combined enterprise value is under $200M, means that TPG will want to put more equity to work. I don’t know if TPG is putting any debt on these deals just yet, but ideally TPG’s growth fund is investing meaningful 9-figures into this rollup thesis. Yes, TPG Growth writes smaller checks vs TPG’s other investment funds, but considering the billion-dollar size of their CAA investment, I bet they’d like to put a similar size of capital to work, though the management TAM is likely a bit smaller. 

Also, an interesting insight I read from Puck news about the Initial Group deck floating around… 

There’s an estimate that the 3 big Hollywood agencies control about 85% of talent (CAA 40%, WME 28%, UTA 18%), a result of the M&A consolidation over the past decade that I discussed above. If TPG made > $2.5B with CAA via its last rollup, then more M&A is likely as TPG looks to scale up Initial Group the way the firm did with CAA during its 13-year ownership.

 

Will new management company upstart Range Media ramp up its M&A based on this?…

Yes.

They have an M&A track record: 

  • Merged with film / TV prod co Automatik (prod co behind La La Land) in Jan 2023
  • Bought upstart athlete mgmt co Stoked in Sep 2023

They also have financial backing from Point 72, Liberty, Wildcat Capital, A+E Networks = they have capital to deploy.

Range was likely founded with a similar thesis to Initial Group. Now their thesis has been further validated by another aggressive media investor in TPG. I bet their recent boardroom convos now have a clear takeaway…”go faster”.

(…even despite the litigation Range is facing with CAA. Sometimes you have to break a few eggs to build anew in Hollywood).

––––––––

 

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

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