Michael. Deion. Chico Escuela. To the catalog of sports comeback stories add financier Teddy Forstmann. The 64-year-old silver-haired buyout specialist who gained fame for a string of high-profile (and high-profit) deals in the 1980s and '90s--he bought and successfully ran Dr Pepper, Gulfstream and General Instruments, among others--last week announced he'll take over sports marketing megafirm IMG for $700 million. Forstmann, who recently ended up as the defendant in an investor fraud lawsuit after his $2.5 billion investment in two telecom firms, feels he can turn IMG into the sort of money machine he created when he took over Gulfstream in 1990. "I'm 29 for 30 when it comes to these big deals," says Forstmann. "That's a pretty good batting average."
In order to make this one work, he is going to have to, as he says, "make one and one equal four." He turned Gulfstream around thanks to the introduction of the flashy Gulfstream V jet that made tycoons swoon and athletes renegotiate the travel clause in their contracts. The sports marketing business, however, does not offer such simple, jet-propelled solutions. IMG, in particular, has not had a clear flight plan since the 2003 death of founder Mark McCormack, who pioneered the field of sports marketing. The firm, which books most of its billion-dollar revenue by partnering its superstar clients with corporate sponsors, has been divesting itself of some noncore assets (such as French soccer team RC Strasbourg, which it owned for six years) and shedding real estate and staff, laying off 400 people in the last year. While the firm's client list includes Tiger Woods, Peyton Manning and Venus Williams, it has lost out on such budding superstars as Yao Ming and LeBron James--who plies his trade in Cleveland, where IMG's headquarters is located.
Forstmann's best hope lies in IMG's TWI unit, the world's largest independent producer of sports programming, handling Wimbledon and other lucrative properties. "The TV arm is their obvious growth play," says Randy Vataha of Game Plan LLC, an investment-banking firm specializing in sports-related deals.
"Sports have always been a big deal to me," says Forstmann, who is a golfing buddy of IMG client Vijay Singh and hosts a summer pro-am tennis tournament in the Hamptons. "When Bobby Thomson hit that home run, I didn't talk for a week." The obsessive Dodgers fan ran the numbers and considered buying the team last year. Now that he's in the sports game, Forstmann swears he can thrive as he has in other fields. "I coached Vijay Singh and made him the Number 1 golfer in the world," he says. Then, cautious about maintaining a close relationship in a business in which relationships are everything, he quickly adds, "That's a joke."
October 10, 2004
--Karl Taro Greenfeld