MBW Reacts is Music Business Worldwide’s series of analytical commentary written in response to recent major entertainment events and news articles. Only MBW+ subscribers have unlimited access to these articles. The following article was originally published in the latest MBW+ review email, published exclusively for MBW+ subscribers.
Guess: For years, Irving Azoff’s name was a dead giveaway in American commercial professional offices.
Since its founding in 2013, Azoff’s Global Music Rights (GMR) has become more competitive with the likes of SESAC and Cobalt’s AMRA, as well as BMI.
But if you say Azov’s name right now in the offices of these companies, or more precisely, perhaps in the offices of their owners, people might start laughing.
As MBW reported last month, GMR has just been valued at US$3.3 billion following a deal that makes US-based private equity firm Hellman & Friedman its new majority shareholder.
My sources tell me that Hellman & Friedman (H&F), which previously invested in Getty Images, valued GMR at about 18 times annual earnings.
H&F bought TPG’s GMR shares in line with its $3.3 billion valuation. It also purchased some shares from Irving Azoff, also based on valuation, but Azoff holds a minority stake in GMR.
MBW announced the news of the GMR stock sale on September 19th.
Soon after, companies like SESAC, AMRA, and BMI (and their owners) would realize the same thing. “Thanks to the Azoff deal and doubling down on that, we are worth more today than we were yesterday.”
Which companies are enjoying doing that the most?
New Mountain Capital likely completed its acquisition of BMI in a 10-digit deal in January 2024 (BMI became profitable in 2022).
Sources differ on how much New Mountain (and its minority investor Google/Alphabet) paid for BMI, but the consensus among sources is between $1.2 billion and $1.5 billion, with profits It appears to be 8 to 10 times more expensive.
(In February, iHeartRadio announced it received a $101.4 million windfall from the sale of BMI and previously told analysts it owned “just under 10%” of PRO. (implying that BMI’s valuation in the Mountain deal is US$1.1 billion), but there are also additional considerations, such as the $100 million in funds that BMI distributed to its songwriter members after the sale. BMI and GMR are also not an apples-to-apples comparison. BMI has a much larger member base. GMR is otherwise bound by U.S. consent statutes. )
Is there a bigger story here? Private equity is all about music collecting organizations.
US-based PE firms currently control BMI (New Mountain), GMR (Hellman & Friedman), AMRA (Francisco Partners, via Kobalt), and SESAC (Blackstone).
Collectively, these companies are spending billions of dollars to make this happen.
Blackstone, I just checked, acquired SESAC seven years ago at a valuation of $1.15 billion (at a 19x multiple, according to sources who have seen the deal details). A consortium led by Francisco Partners valued Kobalt (including AMRA) at approximately US$750 million for an acquisition in 2022, and as previously mentioned BMI was sold earlier this year in a deal valued at more than $1 billion. And Hellman & Friedman’s majority acquisition of GMR must have cost at least $1.68 billion (51% at a $3.3 billion valuation). .
Collectively, these four transactions are expected to amount to more than $5 billion in transaction value alone.
This bunch of PE firms could have spent that much money on PROs if they all believed the same three things. (i) There has been an explosion in the measurable use of music around the world. (ii) usage is traceable and billable through technical improvements; and (iii) the resulting financial spoils are up for grabs.
Another interesting angle on this is that at a time when we’ve seen a noticeable slowdown in the money that PE firms (and other private investment firms) spend on blockbuster music rights deals, private equity firms are spending billions of dollars on PROs. That’s what you’re spending.
In fact, let me qualify that. Investment companies still invest large sums of money into portfolios of songs, only buying songs from owners who have bought them once before.
In the past nine months alone, we’ve seen:
Carlyle Group-backed Litmus Music has spent a nine-figure sum to acquire Opus, a music rights portfolio previously backed by Elliott Investment Management. (Fun fact: Elliott’s former portfolio manager, Adam Katz, now runs Irenic Capital, an activist investor that owns 8% of Reservoir stock and currently owns the company’s management team.) Shamrock announced. Acquired music rights portfolio from Vine Alternative Investments. This includes the Calvin Harris song catalog, for which Vine previously spent $105 million. Blackstone will acquire the Hypnosis Songs Fund rights portfolio, previously owned by public shareholders (including institutional investors), for $1.58. Universal Music Group and Dundee Partners have teamed up to acquire a majority stake in KKR’s Code Music, valuing the company at $1.85 billion and granting UMG a 25.8% stake.
This buyer-to-seller trend is not going away, as PE owners of music rights bundles look to cash in and consolidation is here to stay.
Rumors of potential sale targets include Tempo Music (owned by Providence, which it previously tried to sell in 2022) and Round Hill. The latter company sold its public funds to Concord last year for $469 million, but still owns its private catalog through its New York headquarters.
Oh, and if you’re looking for future big music M&A deals that don’t involve music rights or PROs?
Pay attention to the stem.
Rumors have been circulating in the market that the Los Angeles-based independent artist services company, run and founded by Milana Rabkin-Lewis, is receiving strong acquisition interest from both major music companies and global distribution companies. There is.
That’s not surprising. Just as major labels in the U.S. are starting to sign more service company-like deals, service companies like Stem, which is well-versed in the front lines, are increasingly challenging the majors. Stem’s ability to pay large upfront payments to artists was enhanced last year with a $250 million credit agreement with Victory Park Capital.
Raine Group is understood to be representing Stem in the potential sale, as is common in these types of talks these days. world music business