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CAA’s TPG Capital Deal: Show Me the Money!

CAA's TPG Capital Deal: Show Me the Money!

The contracting entertainment economy that compelled producer Graham King to fill the distribution void with FilmDistrict has not been kind to the talent agencies. Even dominant agency CAA is looking for cover, as studios make fewer movies and reduce talent fees. Thus CAA is announcing today that they have found a taker for a minority stake in the company. CAA is getting an infusion of cash from private investment firm TPG Capital (reportedly, hundreds of millions; they were seeking $250 million).

Tellingly, CAA, which launched a sports division in 2006, has rebranded itself as “the world’s leading entertainment and sports agency” (shades of Jerry Maguire‘s “show me the money”) and calls this purchase of a 35% non-controlling minority stake in the company “a strategic partnership.” ICM already gave up a majority share to equity investor Rizvi Traverse in 2005. Meanwhile WME, led by Ari Emanuel, is buttressed by its 50 % share of William Morris receivables (from Elvis, Clint and Marilyn to Roseanne and the Cosby Show), and doesn’t have to share its new business with the old owners. Still, all the surviving agencies could be a third of their current size in a few years.

CAA and TPG also are committed to establishing a $500-million investment fund for future investments. CAA’s partners–president Richard Lovett, Bryan Lourd, Kevin Huvane, and David O’Connor (known as the Young Turks)–have committed to stay with the agency for five years, stated the agency:

CAA exists for one reason – our clients. Our new relationship with TPG will help us continue to build momentum in the work we do for clients every day.  With TPG’s experience and resources, this could be accomplished through capital investments that build upon our full-service platform, new business leads developed through TPG’s extensive worldwide relationships, expert insight on the international marketplace, and a myriad of other ways.

The question is, will CAA use this money to fund film and television production, given that agency/guild agreements ran out years ago? (That’s true of SAG, but not AFTRA.) WME owns a chunk of film-funder Media Rights Capital. If Hollywood isn’t going to fund production, the argument goes, then the agencies will. CAA has said that the agency has no intention of pursuing that scenario.
David Bonderman, TPG Founding Partner stated:

“CAA is the clear leader within its industry and the talent agency most trusted by successful actors, directors, writers, producers, musicians and athletes. Over its history, the company has demonstrated a consistent ability to identify nascent opportunities and expand into new markets.  CAA’s outstanding management team has built the gold-standard franchise in their industry based on a culture of exceptional client service, and we look forward to supporting CAA at this exciting inflection point in their evolution as they look to expand their operations and services around the globe.”

Thus CAA has buttressed its TV and movie business (it reps clients Tom Cruise, Tom Hanks, Anthony Hopkins, Hilary Swank, Reese Witherspoon, Oliver Stone, Jim Carrey, Steven Spielberg, Brad Pitt, Meryl Streep, George Clooney, Sandra Bullock, Oprah Winfrey, Julia Roberts, Kate Winslet, Will Ferrell, Keanu Reeves, Mike Nichols, Cameron Diaz and David Letterman) by getting into technology (Cisco, IMAX), incubating internet companies (FunnyOrDie), marketing (Coca Cola, Dell, Mattel), game design, music (concert tours do well for them) and industry dominant sports–they rep 650 top “athletes, coaches, broadcasters, teams, leagues, venues and marketers” including Derek Jeter, Shaun White, Novak Djokovic, Cristiano Ronaldo, the New York Yankees, Chelsea FC, and the NCAA’s Pacific-10 Conference.

CAA also partnered with Merrill Lynch’s Media and Sports Structured Finance Group in 2008 to create an investment bank, Evolution Media Capital (EMC), which repped the buyers of the Texas Rangers and structured Sony ATV’s debt financing for its 50% acquisition of the Beatles library; advised on setting up Chris Meledandri’s new animation house at Universal, Illumination; structured the debt financing for a $245 million film fund for Participant Productions; raised a $100 million film fund for a National Geographic; and handled the sale of client Authentic Entertainment to Endemol.

(Here’s CAA partner Bryan Lourd’s speech last June.)

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