Los Angeles – city of sunshine, swimming pools and movie stars. For a number of private equity firms, LA is now the place to be seen as the opportunities presented by entertainment assets have suddenly become more alluring, with talent management agencies particularly high on the agenda.
In September alone, private equity firms made two major investments in talent management businesses. Forstmann Little, the New York buyout group, agreed to acquire IMG, the sports and talent marketer, for a reported $750 million (€604 million) in cash. IMG happens to be one of the top managers of athletes and entertainers, looking after a roster of stars ranging from golfer Tiger Woods to actress Elizabeth Hurley. The company also produces sports television programmes through a division called TWI, which has a library of more than 150,000 hours of television programming.
In a similar deal in September, Boston private equity firms Thomas H. Lee Partners and Bain Capital said they would buy a minority stake in the Firm, an entertainment, sports and “lifestyle marketing” business.
On a recent visit to Los Angeles, a Private Equity International writer, while sitting in the palatial offices of Platinum Equity, the buyout firm founded by billionaire Tom Gores, was interested to discover yet another private equity connection to a local talent manager – Paradigm Talent and Literary Agency. Paradigm occupies a building adjacent to Platinum Equity's Beverly Hills headquarters. It also happens to be run by Tom's brother, Sam Gores.
Paradigm was founded in March 1993 when Sam's talent agency, Gores/Fields, merged with three other boutiques. Sam Gores is now Paradigm's president and CEO.
Sam is the middle sibling of three brothers, which in addition to Tom includes Alec Gores, the founder of private equity turnaround shop Gores Technology Group, also based in Los Angeles. Sam is less well known because he is the only non-billionaire brother, and therefore does not turn up on the Forbes list, where Alec and Tom are tied as the 126th richest people on the planet.
But Sam has done very well for himself growing Paradigm into one of the most recognised and powerful talent agencies in the entertainment business. Most recently, Sam teamed with Tom to purchase his Paradigm's current headquarters (the former site of talent manager MCA), a massive Georgian-style mansion replete with water fountains and white columns, a move that reportedly cost approximately $50 million.
Platinum Equity was among the most acquisitive technology-focused private equity firms in the midst of the most recent recession. Sam has a similar appetite for expansion within the entertainment industry, hence the investment in a larger headquarters. His business is currently in negotiations to purchase talent and literary agency Writers and Artists Group International. This past spring, Paradigm bought Genesis, a literary boutique firm with numerous TV show “runners” – programme creators and executive producers – as clients.
A Platinum Equity spokesperson stressed that the firm has no stake in Paradigm's business. ENT Holdings and “The Lost City” are personal investments on the parts of the Gores brothers.
But one can't help but wonder whether a third-party investment vehicle looms as a sequel. Platinum Equity has been around since 1995, but not until it launched its debut $700 million buyout fund this past July did it become independent of Tom's wallet. Ditto for Gores Technology, which started life as a personal investment vehicle for Alec.
The stars are certainly aligning for the Gores brothers.