Two Circles and TRM: The $45million questions
In this newsletter:
Two Circles has bought TRM Partners for $45million (WSJ’s figure)
We talk to the founders of both companies in Unofficial Partner Pod #123
What does a sales unit add to Two Circles’ data offer?
What did the TRM team learn from their time in the Man Utd sales office?
What are the lessons from WPP’s ESP story?
Two Circles, Bruin Sports Capital’s data consultancy business has bought TRM Partners, a rights sales company.
The plan is to create a rights sales house under the Two Circles brand.
The WSJ put the price of TRM at $45million.
The deal doubles the value of Two Circles from $42 million when Bruin acquired an 80% stake in the company from ad-holding giant WPP PLC in December of last year, the person said.
The idea is sound. Two Circles has led the way in prioritising first party customer data to create new sponsorship opportunities. Their insight was then used by client governing bodies, rights holders and their agencies to sell those assets more effectively, taking the profit from Two Circles’ work.
This is the plight of every consulting business, which is largely paid on the basis of fees and retainers, rather than commission on sales. In short, Two Circles left a lot of money on the table for others to pick up.
Another key point here is profit. TRM is a high margin business. Sales always is: Sell a big shirt and you get a chunky commission payment every year of the contract at zero cost. This gives Bruin another big upside, which is certainty of revenue over the coming years. That’s gold dust in a Covid world.
The Manchester United footprint
Leo Thompson and Harry Horsely (below), the co-founders of TRM Partners, learnt their trade in Man Utd’s sales office from 2010 to 2015, a period defined by high growth in the club’s commercial revenue.
In practice, the presentation of sponsorship rights borrowed from the way the banking industry sells merger and acquisition opportunities in the financial markets: there’s an interesting bit in the podcast about how United attempt to build competitive tension for their rights.
TRM’s claimed USP is that they somewhere between an in-house sales team - which come with high fixed costs for the rights holder - and a big sales agency, which Horsely - who was formerly at IMG - suggests can lack focus when representing a broad portfolio of inventory across multiple rights holder clients.
Time will tell whether this ‘middle ground’ can hold as the business grows under Bruin’s umbrella.
ESP v.2?
This is not Gareth Balch’s first rodeo when it comes to building a sales offer.
Remember ESP? WPP’s attempt to build a more overtly commercial agency around Two Circles data expertise.
It was much heralded at the time, and it ultimately failed.
WPP’s media agency GroupM was a major stumbling block.
I’ve written about this in a previous newsletter (When Lesa Ukman Met GroupM) which was taken from our podcast conversation with the brilliant Lesa Ukman, the founder of IEG, which was part of the sports jigsaw puzzle within WPP at the time (Pod #84).
Ukman gave us the lowdown on how sport sponsorship works, or doesn’t, when placed within a major media sales house.
IEG sold to WPP in 2006:
We couldn’t keep growing as we were. And here’s the irony, we ended up selling to GroupM, the world’s largest media buying company. That’s not who I wanted to sell to, I’ll just say it right there. My brother and sister had equal shares and that’s what we decided to do. It was horrible. Horrible.
The next bit of the story is familiar to anyone who has worked in sports marketing or sponsorship within a bigger marketing services group.
We were working on an ROI project for a major client, who was paying us $200,000 to look at several of their sponsorships and analyse the return on investment. We were showing them they were paying huge premiums on the media side and the sponsorship side and they were getting no credit from their customers or the fans of these sports events for what they were doing. The only thing that was working for them was a theme park project, which had no media. We had all the primary research, and it was a big client to us.
I get a call from somebody at GroupM, and it turns out that this same client is a $40million client of theirs and it was they who recommended the media pieces, and ‘this was not acceptable, you know, so just shut up’.
This scenario is being played out at a marketing network near you every day of the week. Sport is a sparkly looking thing and way more interesting than the tedious grunt work of flogging ad space. But the media sales makes more money, so…well, you know the rest.
It was not a great fit. Their model was turnkey. Hire these young media buyers, train them, mark it up, get more money, the end. Our model is so labour intensive, we charge a fee that’s nothing to do with hours, and everything to do with value, we get our money upfront. Nothing we did made it a good fit.
They are just such different animals. At the time, all the below the line service agencies and all the media agencies were looking for new sources of revenue to make up for the fact that the media and marketing world was changing so dramatically. I think that’s why they bought us.
Beware sexist British wankers
It was such a strange, odd fit from the beginning. The other odd thing was that I was always enamoured with British marketing, and I loved British plays and books, so I was just so excited to be part of a British entity. But then I quickly found out that things that I had taken for granted all these years, that you could be a woman and do whatever you wanted, but there was so much sexism. We all spoke English but we spoke different languages. I couldn’t believe it. I finally got to use the word ‘wanker’ - I’d read that word in British novels and never got to use it, and then I was like, oh my god, what a wanker!
One lesson from the ESP story is that skewed incentives can lead to big marketing network groups failing their clients.
And this is why there’s always room for sector specialist upstarts.
That’s the space that Bruin Sports Capital occupies today, with Two Circles and TRM Partners coming together to add sales oomph to the data cleverness.
And there’s a lot of private equity cash floating around the US financial markets happy to take George Pyne’s bet.
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