Business

After IPO, Endeavor President Plans 'Thoughtful' Acquisitions, 'Long-Term' China Bet

Endeavor, 2017
Courtesy of Endeavor

     

Mark Shapiro also identified marketing and advertising as potential acquisition areas for the company now that it has gone public.

So Endeavor is a public company. Now what?The owner of WME, IMG and UFC raised more than half a billion dollars in an IPO this week, two years after it first embarked on a path to the public markets. It raised more than $1.7 billion in a private placement leading up to the IPO. Now, it plans to put that capital to use.

“We are all about growth mode right now,” Endeavor president Mark Shapiro told The Hollywood Reporter Thursday. “We are going to take advantage of the current environment and the demand that we all see for live events, experiences, premium content, sports betting. We have a lot of secular tailwinds in our favor.”

Shapiro spoke to THR from the New York Stock Exchange, where just a few hours earlier he rang the opening bell alongside Endeavor CEO Ari Emanuel, executive chairman Patrick Whitesell, UFC chief Dana White and other top Endeavor executives. Shares in the company initially popped by about 10% over the $24 per share IPO price, before settling just above its IPO price.

The company has grown over time in large part from acquisitions, spanning sports, entertainment, marketing and events. Shapiro says that will continue now that it is publicly traded.

“We are going to continue to be thoughtful but also aggressive when we see acquisition opportunities that enable our growth to accelerate,” Shapiro says, noting that the company has made 20 acquisitions over the past 5 years. “In any respective area, be it content, live events or experiences.”

He also identified marketing and advertising as growth areas for the company, which already owns the creative agency 160over90.

“That is an area we will further lean into, that is an area that drives our client business, and that is an area where we will be looking to identify tuck-in acquisitions,” Shapiro says. “We have the events and clients brands are looking for. We will be a one-stop shop for them when they are trying to reach audiences.”

Critically for the company, Shapiro also says that addressing its $5.9 billion debt load is a “major priority.” “You are going to see this company get to 4 times leverage fast,” he says.

That focus on debt reduction was one reason why S&P Global upgraded Endeavor from a “CCC+” rating to a “B” rating on Thursday.

“We no longer believe Endeavor's or WME IMG's capital structures will likely be unsustainable over time or that WME IMG may be motivated to seek a distressed debt restructuring, which were key risk considerations that factored into our previous rating,“ the ratings agency wrote. “Through the IPO and concurrent transactions, Endeavor will likely have sufficient liquidity to rebuild its business to a leverage level commensurate with a 'B' rating, possibly by 2022 under our base-case forecast, despite the near-term stress on revenue and cash flow.”

A big reason for that improved liquidity is the UFC.

The mixed martial arts giant is now wholly owned by Endeavor, which used cash from its private placement to buy out its other investors.

To hear Shapiro tell it, UFC is the key to global growth for Endeavor, and a potential entry point into that most elusive market for U.S. companies: China.

“In sports, nothing is hotter, nothing is trending better than the UFC,” he says, noting the sold-out crowd of more than 15,000 people at UFC 261 in Jacksonville, Florida April 24. “We are bringing the UFC to more regions of the globe, Russia was our latest, France is the future, and our long-term future is China, where we think we can mimic the same kind of explosive growth we have had in North America.”

UFC is also a good gateway for expansion in the world of sports betting, a sector that Endeavor already plays in via IMG Arena. “Very shortly the U.S. is going to reflect what we see in the U.K., where betting is a way of life,” Shapiro says.

And while COVID is still keeping much of the live events business at bay, Shapiro says that what events they do have operating indicate there is pent-up demand. “Post-COVID, I don’t know if we can price tickets high enough, for the way they are selling these days,” he says.

On the content side the company is hoping to be something of an arms dealer, leveraging its owned properties and client roster to ride the streaming wave.

“Disney+ and Peacock and HBO Max, Netflix, it’s a race to the top in terms of spending so that they can combat each other, and we are positioned to serve them all,“ Shapiro says. “We have an incredible roster of clients, partners, celebrities, athletes, music artists, that consumers want to pay top dollar to see and listen to.”

In its prospectus, Endeavor makes frequent reference to “The Endeavor Platform.” While it uses tech jargon, Shapiro describes it as the amalgamation of the company’s businesses, a new type of corporate flywheel (to borrow another term popular with the C-suite these days), and the company’s representation business bolstering its sports business bolstering its marketing business bolstering its content business, with the ultimate goal of achieving a scale greater than the sum of its parts.

“That is the business we are all in: critical mass, the big audience business,” Shapiro says. “You’d be hard-pressed on a holistic perspective to find a company that is as well-resourced as we are when it comes to content and clients.”

This article was originally published by The Hollywood Reporter