You’re reading Value Add’s weekly briefing, the leading newsletter for the operating side of private equity. Here’s what you need to know this week, from insights for PE-backed executives and portco news to recent buyouts and investment trends. 

Insights

Chart of the Week: PE-backed exits are more sensitive to interest rates than buyouts, according to a new analysis by Value Add. This is understandable, considering that over 50% of private equity-backed exits involve sales to strategic acquirers, while around 30% are secondary buyouts (sales to other PE firms). With private equity firms holding record amounts of dry powder, many have stayed active in buyouts and secondary transactions, whereas strategic acquirers have likely been waiting for more favorable borrowing conditions (hence driving more exits for PE). (Read More)

More Insights

• Exits Are More Sensitive to Interest Rates Than Buyouts (Read)
• History Shows Interest Rates Alone Have Marginal Impact on Buyout Activity (Read)
• “We’ve Moved Downmarket”: Behind Riverside’s Unique Roll-Up Strategy (Read)
• US PE’s Outperformance of European PE is Structural, Not Operational (Read)
• These Are the Top Feeder Companies for PE Operating Partners (Read)

Spotlight

Put your records on. Not everyone knew that music legend Irving Azoff – the former CEO of Ticketmaster and Live Nation – was looking to sell his music licensing business, Global Music Rights. But, that’s exactly what happened, with current minority stakeholder TPG agreeing to sell its equity in GMR to Hellman & Friedman, with additional equity being transferred from Azoff to Hellman & Friedman.

GMR was established in 2013 by Azoff. It owns the rights to the works of artists including Bruce Springsteen, Bruno Mars, George Harrison, John Lennon, Metallica, and Pearl Jam.

It is unclear what the size of the total stake that Hellman & Friedman will walk away with is and if it is a majority control stake. What is known is that Hellman & Friedman has valued GMR at $3.3 billion and is taking all of TPG’s stake and part of Azoff’s, too. 

TPG acquired an unknown stake in the company in 2022. Other institutional investors at that time were Ares, AustralianSuper, and Redwood Partners – as of June 30, Ares remained invested in the firm, as did Australian Super, though it is unclear if Redwood retains its investment. GMR did not respond to requests for clarification. 

A familiar tune? This isn’t Hellman & Friedman’s first foray into media licensing – in 2008, the firm took Getty Images, a global marketplace for image licensing, private. 

While Getty Images had been quite aggressive with add-ons pre-acquisition, buying around 15 of its competitors between 1995 and 2008. Nevertheless, the firm made only two add-ons under Hellman & Friedman’s leadership, both in 2008 – Redferns Music Picture Library and Jupitermedia.

This, combined with legal controversies the asset faced, could explain why Hellman & Friedman ultimately sold it for just $3.3 billion – short of the $4 billion it was hoping for – in 2012 to the Carlyle Group. 

In rhythm. When it comes to GMR, hopefully, Hellman & Friedman will sing a different song. There are many tailwinds for the intellectual property licensing sector currently, with Goldman Sachs reporting that industry growth exceeded expectations in 2023, rising 15% year-over-year. GS expects the industry to maintain a yearly growth rate between 7% and 8% from 2024 to 2030.

And other private equity firms are taking notice. Here are some other recent transactions in the space:

• Apollo-backed investment firm Harbourview has a portfolio that includes works of artists including Nelly, Wiz Khalifa, and Pat Benatar. The firm values its portfolio at $1.6 billion. 
• Shamrock Capital paid $300 million for Taylor Swift’s first six albums alone in 2020. 
• The Carlyle Group launched Litmus Music in 2022 with a $500 million credit commitment.
• Brookfield bought a minority stake in Primary Wave Music for $1.7 billion in 2022. 
• Francisco Partners bought a majority stake in music publisher Kobalt for $833 million in 2022. 
• Blackstone paid $1.6 billion earlier this year for Hipgnosis, which owns the rights to songs by artists such as Blondie, the Kaiser Chiefs, and the Red Hot Chili Peppers.
• Broadcast Music, Inc. (BMI) was acquired by New Mountain Capital and CapitalG earlier this year, too, for about $1.7 billion.
• And finally, TPG has invested in a litany of media rights firms, including Spotify ($1 billion), Creative Artists Agency ($1.1 billion), and a seed investment in Musixmatch.

… All of that makes the $3.3 billion valuation on the GMR deal one of the largest PE music licensing valuations to date.

GMR and TPG did not respond to requests for comment. Hellman & Friedman declined to comment.

Buyout News 

Before we get to last week’s buyouts, we should take a look at the week’s buybacks:

KKR is breaking up Axel Springer. The firm took the media giant private in 2019 alongside CPPIB. The two owned a 48.5% stake in the company, which had a total valuation of €6.7 billion at the time. This current deal will value Axel Springer at €13.5 billion, with KKR and CPPIB retaining control of the company’s €10 billion classifieds business. 

Energy company Vistra is buying out the minority investors in its Vistra Vision platform, which includes its nuclear generation sites, its renewable power sites, and its energy storage and retail businesses. Nuveen and Avenue Capital currently own a 15% stake, which Vistra will buy back for just over $3 billion, to be paid in installments over the course of two years.

When it comes to multi-billion dollar buyouts, British home builder Cala Group has been sold to Sixth Street for £1.35 billion (nearly $1.8 billion). Legal & General, a UK life insurer, is the seller. The deal is expected to close in Q4 of this year.