Will CAA Become First Agency to Go Public?

THR's Next Gen Party | Hollywood, Nov. 7

CAA president Richard Lovett (left) with CAA agent and Next Gen honoree Michael Kives.

As TPG Capital eyes a majority stake in the agency, one competitor says it has the income stability to go public

With TPG Capital negotiating for the private equity firm to raise its ownership stake in Creative Artists Agency to more than 50 percent, speculation in Hollywood has focused on what the future might hold for the town's most star-studded agency.

The deal could be closed by next week. TPG’s relationship with CAA began in October 2010, when TPG took a 35 percent equity stake and created a $500 million investment fund in part to boost the agency’s sports business.

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With the deal, which was first reported Wednesday by the New York Post, TPG would become the first outside majority-owner of CAA. (Silicon Valley venture firm Silver Lake already owns a 51 percent stake in rival WME.) The expansion of TPG's stake inevitably leads to speculation about whether CAA will become the first agency to go public and whether all the top partners will remain at CAA. The agency declined to comment, but even competitors expect president Richard Lovett to stay at the helm.

CAA has steadily diversified beyond traditional Hollywood representation in the past eight years. In sports, the agency represents players including soccer star Cristiano Ronaldo and the Los Angeles Clippers' Chris Paul both in their contracts and endorsement deals. CAA also represents major teams in media-rights deals as well as venues including Madison Square Garden and Yankee Stadium.

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In 2008, CAA co-founded the investment bank Evolution Media Capital, and in the past year it launched a technology venture fund. A competitor says the diversified agency, which also has television packages that generate reliable revenue, has the income stability to go public, as some have speculated is TPG’s endgame.

However, going public would open the famously secretive CAA's financials to investors, rivals and the media, something that likely would make its executives and clients nervous. But with Hollywood talent agencies diversifying into many different businesses (CAA, for instance, has incubated several companies and maintains a separate investment fund for startups), the representation business could someday be a small part of a much larger business, something akin to music and events behemoth Live Nation, which includes a management business.    

While some consider TPG’s further investment in CAA to be an affirmation of their working relationship, one rival claims the two companies’ cultures have clashed, with CAA disappointed that TPG did not support its attempt to acquire IMG (which went to rival agency WME).

CAA declined to comment.