Why Paradigm Fended Off UTA's Acquisition Offer

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UTA chief Jeremy Zimmer; Paradigm chairman and CEO Sam Gores

A $250 million-plus proposal from UTA is rebuffed amid internal outcry as rivals maneuver in the wake of Endeavor's planned public offering.

On June 10, Paradigm chairman and CEO Sam Gores was greeted with a standing ovation when he walked into the talent agency's Monday morning staff meeting.

It was a day after Gores announced that he was not selling the company to UTA, and the relief was in marked contrast to the mood of uncertainty and confusion in the offices three days earlier, after The Hollywood Reporter revealed that the firms were in talks.

"There are reasons why a combination like this would have made sense for both agencies, but in the end, what is more compelling for us is how unique the culture at Paradigm is and how powerful our independent path can be," Gores wrote to staff. Meanwhile, UTA CEO Jeremy Zimmer said in a statement, "We admire Sam and the business he and his colleagues have built. We are disappointed we didn't come to an agreement. But we wish him and everyone at Paradigm the best."

UTA's offer was said to be in the $250 million to $300 million range for the whole agency. Of particular interest were Paradigm's music and talent/literary businesses — top clients include Coldplay, Janelle Monáe, Imagine Dragons, Stephen King, Aquaman director James Wan, and actors Zoë Kravitz and Henry Golding. Gores cited discussions with agents and executives from those divisions as a determining factor in his decision to end negotiations.

"We came and chose to be here for a reason," a source tells THR of pervasive sentiment among Paradigm employees as rumors of a sale swirled for weeks. "There's a lot of good energy at this agency, particularly in the past year."

The company just moved into an expansive 82,000-square-foot Beverly Hills headquarters occupying the entire Wilshire-LaPeer building a year ago and in 2017 completed a similar consolidation of its East Coast operations in a new 50,000-square-foot art-filled space in lower Manhattan.

The aborted UTA-Paradigm negotiation isn't the first time the agencies have discussed some sort of transaction — conversations have taken place as far back as a decade ago. A major part of UTA's strategy to grow its representation business is to acquire agencies outright, most recently electronic music firm Circle Talent Agency in April 2018, e-sports agency Press X two months later and influencer firm Digital Brand Architects in February.

But recent agitation in the agency world — the two-months-and-counting dispute with the WGA over packaging fees and affiliate production and Endeavor's May 23 IPO filing potentially making WME the first publicly traded talent agency — intensified the pressure on Gores, who brought just a small group of insiders into the deal talks.

"You will see a lot of people kick tires," Salem Partners managing director Keyvan Peymani predicted shortly after Endeavor filed to go public. "I absolutely expect to see consolidation, and I wouldn't be surprised if some movement was happening within certain circles to figure out how to compete with a public Endeavor. It's natural that people are going to look at the space again and take a really deep look at all the [agencies] that might be potentials to consolidate together in some kind of a roll-up."

Experts who have been closely observing the agency landscape say that representation firms are currently facing an existential question about identity. Growth is seen as necessary for survival, but a choice has to be made on whether to diversify holdings, as Endeavor has done with moves into sports licensing, bull riding, art fairs and other revenue streams, or double down on core representation businesses — while still providing as many synergistic opportunities as today's clients often desire. "Clients don't just want to do one thing anymore," says one partner at a major agency, "so you need companies that are big enough and structurally built intelligently enough to represent people across the board like that. That trend is only going to accelerate."

Adds Peymani, "It's access. [Agencies acquiring one another] is a way to get as much access as possible, to allow you to say, 'Not only do I have these client relationships, but I can now be better positioned to launch a music festival, or another asset.' When I think about the Endeavor IPO, it raises the question of whether or not an agency can just be an agency anymore. So there's no surprise that these rumors are bubbling up, and that some of them have a lot of truth to them."

Amid the uncertainty, calls into Paradigm in the days leading to Gores' announcement were flying fast and furious. One agent even fielded a query about the prospective UTA deal from a client who is 6 years old. Thus, Gores' weekend missive that aimed to put the whispers to rest — for now.

A version of this story first appears in the June 12 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.