Endeavor Buying On Location Experiences at +/- 12x EBITDA, NFL to Retain Stake
It has been reported that Endeavor is closing in on a deal to acquire the 80% of On Location Experiences (OLE) not owned by the NFL for between $650 million and $700 million; the league plans to retain their 20% stake in the company. The NFL’s ongoing participation - and the 9,500 Super Bowl tickets/year that OLE gets from the league at face value (+ PrimeSport’s allotment) - is critical to the business’ success; the league was responsible for generating 40% of the company’s total revenue last year (balance: 40% other sports, 20% music & travel). In 2018, the luxury sports and entertainment hospitality company posted $55 million in EBITDA on revenues of +/- $600 million (up from just $23 million in ’14).
Howie Long-Short: OLE’s UVP is that it can provide exclusive access to events that fans would otherwise have difficulty gaining entrance to. Frank Supovitz (served as the NFL’s svp of events from ’05-’14) explained that “if a fan is going to spend a lot of money to gain access, then OLE can package the event with a whole bunch of high-margin add-ons and increase the experiential value.”
SBJ reported that Live Nation had actually submitted a higher bid for the company, but suggested that the league’s relationship with the Endeavor resulted in the P.E. firms accepting the lesser offer; it’s being theorized that the current majority owners took less money to maintain “good relations” with the NFL.
RedBird Capital, Bruin Sports Capital and Carlyle Group (CG) bought into OLE for just +/- $70 million back in ‘15, so they’ll realize a +/- 900% return on their investment. As Supovitz noted, “building up a business and then spinning it off is a pretty common occurrence in the private equity world”, so it’s likely the sale had more to do with cashing in on an investment than an eagerness to get out from under the business, but I do wonder if the triumvirate had reservations about OLE’s upside.
Supovitz believes that OLE’s ability to move into other sports and entertainment properties is where the “opportunities really lie.” That may be true, but acquiring and packaging seats found on the secondary market isn’t the lucrative model that the company was founded on (see: Fan’s comment below); and neither is giving up a significant portion of the profits to rights holder to gain access to tickets at face value. OLE’s margins on Super Bowl packages are “really good” because the company isn’t paying a premium to acquire the seats - and they can do the tailgate affordably because they’re not paying for space with the event inside the stadium gates - but that’s not the case when they’re packaging access to other high-profile events; which help to explain why a company with $600+ million in revenue generated just $55 million in profits last year.
If Endeavor is in fact preparing for an IPO, the OLE acquisition may be about “adding valuable earnings” to the company’s bottom line, but Supovitz says “that in addition to any economic benefits, the ability to control thousands of tickets to the Super Bowl is powerful - particularly for an agency that represents athletes, coaches and entertainers.” In addition to the William Morris Endeavor talent agency, Endeavor counts the UFC, PBR and a video streaming platform (Endeavor Streaming) among its assets.
Fan Marino: OLE has humble beginnings. Back in the 90’s, the league would package pro bowl tickets with a gated tailgate party and custom merchandise for fans traveling to Hawaii who wanted an upgraded experience. With the game sold-out, it made for a “great additional revenue stream and it was a very high margin business”; it also allowed the league to re-capture a portion of secondary market ticket sales. By ’05 the league realized it could do the same with Super Bowl tickets and began to package seats with hotel rooms - also difficult to find on Super Bowl weekend - and high-end tailgate parties inside the security gates (so fans can party until kickoff). The league sold +/- 1,000 Super Bowl packages the first time around (Super Bowl 40), OLE now sells more than 3,500 annually.
Editor Note: Supovitz has a book - with a focus on crisis management - coming out in May, entitled What To Do When Things Go Wrong.
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