While terms of the deal and the names of the institutional investors were not disclosed, sources tell Billboard that at least one of the private equity partners is Morgan Stanley, while Spirit's longtime lender SunTrust Bank and Pinnacle Financial Partners led the syndication that provided debt financing to the deal. Billboard was unable to determine the percentage of equity and debt used in the acquisition.
The Spirit catalog includes some master recordings from the likes of T. Rex and compositions from songwriters like Billy Squier, Charles Mingus, Doc Pomus, Henry Mancini, Lou Christie, Louden Wainwright III, Marshall Tucker Band, Phil Coulter, Boz Scaggs, T Bone Burnett, Frank Rogers, Gregg Wattenberg, David Paich, Tim Hardin, and Richie Cordell, Jonny Coffer, Zach Crowell, Rami Dawod and James Bay. According to the company, the catalog includes over 450 top 10 songs and currently has 15 Grammy nominations.
According to sources, Spirit carried a $280 million valuation in the deal. Those sources further suggest the company's publishing catalog produced about $21 million in gross profit, or in industry parlance, net publisher share, the metric on which most music publishing deals trade. Moreover, sources tell Billboard the Spirit deal was never shopped to other strategic music publishing competitors, only private equity in order to allow management to execute the buyout and recapitalization.
While the $21 million in NPS implies a 13.33 times multiple to the valuation, since Pegasus agreed to the buyout without shopping Spirit to strategic competitors who could potential bid up the price, the new owners likely had to pay a premium above the valuation, and thus a higher multiple, for that consideration, industry financial sources speculated to Billboard prior to the deal being completed. Recently, top-notch publishing catalogs have been trading on 15 times to 18 times multiple.
Andy Moats, executive vp and director of music, sports and entertainment for Pinnacle Financial Partners says they found the deal attractive and participated in it because of catalog and management team. "Its an iconic catalog and we have a lot of trust in Jon and Ross and their management team," he says. "We like the publishing space in general and we are very active in the market right now."
For his part, Singer likes that the Lyric Capitol Group deal helps keep the indie publishing sector vibrant. "With everything going on now in the indie publishing sector with publishers like Carlin and SONGS being sold, we are one of the true great indie publishers still around; and we need this [Spirit Music] story to survive for the indie publishing sector," he says.
As to how he managed to pull of the deal, Singer adds, "I had a great relationship with the private equity owners [Pegasus], and I made a pre-emptive offer to buy, which they took."
While Singer declines to offer specifics on the deal, he says that even after paying for the acquisition, Spirit still has more capitol available -- and access to more funds -- to make further acquisitions of both song and master recording catalogs, if the right opportunities come along. In fact, he prefers deals that offer both. Moreover, Singer added that he likes deals that -- when the circumstances and the partners are right -- provide the opportunity to continue to work with the seller by setting up a going forward joint venture.
Spirit Music was founded by Mark Fried in 1995, who has since left the company. Also, as part of this current deal, Chairman David Renzer has left the company. But, otherwise, in addition to Cameron, who has become a partner, Singer says all other key executives will remain with the company. That includes Gary Miller, senior vp of creative services; Rak Sanghvi, managing director U.K./international; Dan Hill, Spirit Music Nashville president; Lauren Hoffman, global controller; Melanie Santa Rosa, vp of administration; Alan Ett, Spirit Music Collective CEO and head of production music division; and Lisa Macy, vp of TV/film. Besides New York and Nashville, the company has offices in Los Angeles, London and the Netherlands.
In a statement, Spirit says it is an aggressive royalty administrator and promoter of its songs into film, television and advertising productions as well as a wide range of new media. Also, Spirit adds the company is known to step beyond the traditional publisher's role to be proactive in legacy partnership that includes creating and executing marketing plans to revitalize its clients' songs and expand their brands.