It’s a great day at What I’m Hearing HQ when a monolithic private equity firm can extract billions of dollars in value from an investment in Meryl Streep. You think I’m joking, but Hollywood sort of doesn’t work unless money—both dumb and smart—continues to be attracted to a business that often makes zero sense. For every Megan Ellison, whose Annapurna lost so much of her father Larry’s money that he basically called the lawyer Skip Brittenham and staged an intervention, there needs to be a Kevin Ulrich, who pumped billions of his Anchorage Capital money into MGM, stuck around for years, and finally flipped the whole troubled studio to Amazon and made his firm $2 billion in profit.
These days, film and television production is basically shut down by labor strikes, and the bottom is falling out of both the pay TV bundle and the theatrical film business. So the fact that TPG, a P.E. firm that invested a big chunk of money into the flailing studio STX Entertainment (yikes) and endured the recent bankruptcy of Vice Media (double yikes), can buy a majority stake in CAA, stay in the very peculiar representation business for 13 years, and not merely escape but emerge with a decent exit—that’s reason to celebrate. (The usual disclosure: TPG also is an investor in Puck.)
Let’s break down this deal, announced yesterday but first tipped by me back in May, right after French luxury goods mogul François-Henri Pinault started talking to TPG’s Jim Coulter and CAA’s Bryan Lourd. Pinault’s family office, Groupe Artémis, is taking over TPG’s 53 percent stake in CAA, giving the agency—with its 3,600 employees, $1.7 billion in 2022 revenue (mostly commissions), and one Death Star office layout—a valuation of a bit more than $7 billion. That’s the enterprise value, including debt, and it represents a 13x multiple of the company’s 2022 EBITDA, per the Financial Times.