CAA's Richard Lovett on Possible IPO: "Is It An Option? Of Course"
The mega-agency's president allows for the possibility while insisting "we have no need to go public."
In this week’s The Hollywood Reporter cover story, CAA president Richard Lovett addressed the whispers: "We have no need to go public," he says, before adding, "Is it an option? Of course."
Indeed, the agency has substantially expanded and diversified, even before TPG bought its original 35 percent stake five years ago (for $166 million, according to an internal document obtained by THR). Last year brought in $647 million in revenue and $121 million in profits, and TPG’s increased investment (with an option to rise to a 60 percent share) upped the agency’s valuation from $700 million in 2010 to $1.98 billion.
Industry observers note that an exit, either in the form of an initial public offering or a sale, would be a no-brainer for the Fort Worth, Texas–based TPG — as well as for Silicon Valley private equity firm Silver Lake Partners, the majority owner of rival mega-agency WME|IMG. Many believe that it is not a matter of whether either agency will go public, but rather which will be the first. Another option is that TPG itself could go public, providing a windfall for the CAA managing partners.
Of course, the trade-off to potential sky-high paydays (for the top brass, at least) is that going public would force an agency, accustomed to keeping its books under wraps, to do just that. And it’s difficult for many insiders to imagine agency bigwigs accustomed to riding Hollywood volatility being forced to answer to shareholders with no interest or patience for that kind of fluctuation. In fact, some at rival agencies already find the idea of working for outside investors, as CAA and WME now do, to be unappetizing due to the perceived added pressure to increase profits.
To be fair, although TPG co-founder Jim Coulter sits on the CAA’s board, there has never been an indication that the private financier has interfered with the agency’s leadership. There are rumors that TPG is impatient that CAA has not expanded even more quickly than it has — its business practices now include sports, investment banking, film finance and venture capital — but Coulter shoots those down.
"People outside of our industry often think that we wake up one day with a plan for when we might sell this or that company," he says, adding that "there is no timetable" on its investment in CAA.
And Lovett insists that CAA’s union with TPG, which has $67 billion in assets under management and whose other investments have included Cirque du Soleil and J. Crew, has been mutually beneficial. "When they approached us to increase their investment, we felt very comfortable," Lovett says, noting that he and his fellow CAA managing partners feel "the excitement, urgency and passion to grow a great company without the distraction of having to have a specific outcome."