Introduction
We are excited to release the first issue of our monthly newsletter Sector Spotlight
This is a comprehensive newsletter coupled with decks for the current or aspiring investment banker/PE investor, diving deep into the qualitative and quantitative nature of transactions, businesses, and trends across sectors, from the POV of an investment banker/PE investor. The groups are led by incoming investment banking summer analysts & analysts across a range of bulge bracket, elite boutique, and middle market banks.
Unlike other finance newsletters, this will not just simply mention or briefly summarize deals and news but will link to decks that include in depth analysis on a given topic. As this is the first issuance, we’ll be covering three sectors: 1.) Media & Entertainment, 2.) , and 3.) Healthcare. We hope you enjoy this month’s edition and look forward to bringing you monthly updates moving forward. Enjoy!
Best,
Jagger Lambert lambertjagger@gmail.com
James Concepcion jamesconcepcion217@gmail.com
Media & Entertainment
September 2023 Deals:
Sports
- WWE-UFC Merger completed. UFC spun off from Endeavor and the combined entity, valuing the companies at approximately $9bn and $12bn respectively and $21bn combined, began publicly trading under the ticker TKO. Morgan Stanley and J.P. Morgan advised the WWE while Raine Group, Moelis, and Goldman Sachs advised Endeavor on the merger (See deck above for deep dive on the transaction and valuation analysis)
- Struggling Premier League Football Club, Everton, has agreed to be acquired by the US private equity firm 777 Partners in an LBO valued at approximately $700 mn. 777 Partners advised by UK based sports financial advisory firm Tifosy
- Formula One Group entered into an agreement to acquire >90% of QuintEvents for $313mm (J.P. Morgan acted as an advisor to QuintEvents)
- Premier League football club Chelsea has raised $500 mm in preferred equity from alternative investment firm, Ares Management. This comes out of Ares’s $4 bn sports, media, & entertainment investment fund raised last year which it has used on other football clubs including Inter Miami and Atletico Madrid.
- Spring American Football Leagues XFL (owned by Dwayne “The Rock” Johnson and Redbird Capital ) and USFL (owned by Fox Corp). announced plan to merge
- Fenway Sports group sells $200 mn minority stake in the Premier League Football club Liverpool to the private equity firm, Dynasty Equity
Film/TV
- Disney begins discussions on sale of ABC with the broadcaster Nexstar, and media mogul Byron Allen. Byron Allen bid $10 bn for ABC along with Disney’s other (non-ESPN) networks FX and National Geographic.See deck above for sale rationale breakdown
- TV analytics firm 605, founded by CEO of AMC Networks and wife of James Dolan (Madison Square Garden), was sold for undisclosed terms to ad measurement company Ispot. 605 was advised by Houlihan Lokey.
Gaming
- Swedish Gaming Conglomerate, Embracer, is exploring strategic options to sell video game Developer Gearbox for approximately $2bn after buying it for $1.4bn in 2021. The deal almost went through to the Saudi Public Investment funded Savvy Games Group but that deal fell apart
- Mobile Games interactive entertainment leader Playtika, acquires Israeli mobile gaming studio, Innplay Labs for $300 mn
Music
- Warner Music acquired a majority stake in 10K projects, an LA based record label behind the the artist Ice Spice, for an undisclosed sum
- LA based music rights owner, Alchemy Copyrights(trades as “Concord”), has acquired Round Hill Music Royalty Fund for $470 mm. Round Hill Music Royalty, which has the rights to music from Bruno Mars, was publicly traded and the deal represents a 67% premium to its share price but still below its 2020 IPO price.
Talent Agencies
- Artémis, the investment vehicle of French billionaire Francois Pinualt, bought a majority stake in talent and sports agency, Creative Artists Agency, for a $7 bn valuation from the private equity firm TPG. TMT investment bank Allen & Company advised CAA, while Rothschild advised Artémis
September 2023 Trends
- See deck above for a deep dive into these topics and much more!
- Legacy media companies have been forced to shift their operating vision to a DTC streaming service model, steering away from the traditional Film & TV linear cable due to cord cutting – ‘18-22 saw a Total Pay-TV Subs. CAGR of -5% with an expected -4% CAGR until 2030
- Disney’s stock is trading at its lowest level since 2014 as a result of an unprofitable DTC model, drops in subscribers, the actors and writers strike, coupled with poor succession planning has destroyed shareholder value
- Theaters faced a rough few years due to the COVID-19 pandemic and a rapidly changing consumer entertainment preference post-COVID, however we now see theater starting to rebound, with companies like Cinemark delivering worldwide Adj. EBITDA of $232mm in 2Q23. Represents a 24.6% Adj. EBITDA margin, amongst the highest margins in company history
- The box office saw a strong summer 2023 with blockbusters like Barbie and Oppenheimer. However, just because the box office brought in tons of revenue doesn’t mean the studios would be profitable on the theatrical front. In fact, WarnerBros. Discovery was the only major studio to realize a theatrical profit this summer, with the rest losing hundreds of millions of dollars.
- On 09/24/2023, after a week of negotiations, the WGA reached a tentative agreement on a 3-year deal with the AMPTP. This doesn’t necessarily mean filming will resume – the SAG has yet to reach a deal but this increases the odds of a deal closing soon. This doesn’t reverse the financial implications the strike had on studios, the state of California and the entertainment industry as a whole
- The APAC region continues to be the biggest gaming market
- Mobile Games experienced immense growth of 7.4% and contributes around 50% of all market revenue. The Mobile Gaming market size is expected to grow from $141.71bn in 2023 to $300.47bn by 2028, a growth rate of 112% in 5 years and 16.22% average YoY growth
- Sports :Despite an overall decrease in M&A activity, the sports tech industry has been active. Q2 of 2023 saw a record-setting 105 M&A deal announcements with $14.5bn in disclosed deal value
