What would Teddy Forstmann do?
George Pyne cited his old IMG boss as his mentor and guiding star. But what does that mean?
If cash is king in a post-Covid world, then George Pyne is in a better spot than most (get our podcast with George Pyne here). What he decides to do with his investors’ money will influence how others view the value of sport. Last November, Pyne’s Bruin Sports Capital raised a further $600million from CVC and The Jordan Group. See Bloomberg’s account at the time:
Exit, pursued by Ted
Pyne said he was ‘pursued by Ted’ to leave Nascar after 11 years and become President of IMG and a board member in 2006. Forstmann had bought from the McCormack family, following founder Mark’s death in 2003.
It’s clear from talking to Pyne that this was a formative time in his development.
I didn’t know who Ted was, he’d bought IMG the year before, but he wanted to meet and I didn’t do a lot of diligence on who he was. I thought it was going to be a half hour meeting and it was two hours. I was forty years old, I thought working with someone like Ted Forstmann I could learn a lot, he’d bought and sold 39 companies.
What was the IMG brief? (See below: ‘The most fucked-up company I’ve ever seen..’)
It was a global restructuring requiring a global view of the business of sports, so that was different from Nascar where we needed to identify growth segments and really grow earnings, not just revenues but earnings.
Is he building IMG again?
Asking around before doing the interview, a few people suggested that Bruin shouldn’t be viewed as a pure private equity house, but as bits of the jigsaw that would make up an agency of the future. He wouldn’t answer that question but look at the companies in the Bruin portfolio and you can see why people might think that. There’s data (Two Circles), streaming (Deltatre and Overtier), design (Soulsight), brand and activation (Engine Shop) and an early stage investment vehicle (Courtside Ventures). Add in how George sees himself, which is not as a money man but as someone who runs things, which we know from his CV is what he’s good at.
Operational expertise matters. Having managed through difficult times is important. Having the proper leverage on businesses is important…I’m more of an operations guy than a finance guy, when you look at our businesses we have lower amounts of leverage and create value by operations not necessarily by financial structuring.
What happens when you’re owned by private equity
I mentioned to George Pyne that people working at IMG in the 2000s, often cited a change in culture under Forstmann, and wondered if this is inevitable if you’re taken over by a private equity firm. This is a question that many people in sport will be asking themselves over the next few years as p/e comes knocking.
A little bit, it tends to make people more focused on efficiency. Although Forstmann Little owned IMG for nine years. I think the way to build and create value is not to think about your exit.
Who was Teddy Forstmann?
It’s a working theory of mine that Ted Forstmann is the most influential person in sport today. My reasoning is that many of the people now running private equity firms grew up worshipping him. This is a thread I’ll pursue in later podcasts. For the time being, here’s what wikipedia says about him.
“The most fucked up company company I’ve ever seen in my whole life by a long shot”
This was Ted Forstmann’s view of IMG under his mate Mark McCormack. It comes from a Vanity Fair feature written by William Cohan, and is the best analysis of Forstmann in the IMG years.
The other person to be deeply influenced by Forstmann was Ari Emanuel, whose William Morris Endeavour now owns IMG, rebranded as Endeavour.
This piece, again by William Cohan, is about Ari Emanuel’s near obsession with IMG in the noughties.
Forstmann—himself a larger-than-life character, just as passionate and mercurial as Emanuel—also nursed an obsession to own IMG, which was then still controlled by its founder, Mark McCormack. An amateur golf player, McCormack had begun the firm to help his friend Arnold Palmer and other professional athletes earn extra money by endorsing products and adding their star power to corporate marketing campaigns. Forstmann thought IMG was amateurishly run but full of potential. "They had a hell of a franchise that they weren't really taking advantage of," he told me in a December 2010 interview in his posh office in Manhattan's G.M. Building. "This company had never used the word 'profit.' Mark liked to end the year at zero. He wanted to take the last $20 or $25 million. None of these people knew what the other guy did. It was ... I'll use colorful language ... It was the most fucked-up company I've ever seen in my whole life by a long shot."
McCormack had no desire to sell, however. "How I got the deal was he died," recalled Forstmann bluntly. During Forstmann's negotiations with McCormack's estate, Forstmann and Emanuel kept talking, and before Forstmann closed the deal, for $750 million in cash, in November 2004, the two men considered the possibility of IMG's also acquiring Endeavor, with Emanuel running the combined company. When that did not come to pass either, an incredulous Emanuel is said by a Forstmann insider to have proclaimed that the merger would be happening and that he was, in fact, going to be the C.E.O. of the combined company. Such exuberance left Forstmann nonplussed and a bit miffed.
Over the next decade Forstmann transformed IMG into an international production-and-packaging powerhouse. The expanding business cut profitable deals with more than 200 American college and university sports teams, as well as with Indian Premier League cricket, Wimbledon, the Australian and U.S. Open tennis tournaments, tennis tournaments in Spain and Malaysia, and Barclays Premier League soccer. It ran Fashion Week in New York, Milan, and London, and in China it formed an exclusive joint venture with the national television network to create sports programming—all this in addition to representing such sports stars as Novak Djokovic, Maria Sharapova, and Venus Williams. It also signed up an array of fashion designers and models, including Michael Kors, Diane von Furstenberg, Gisele Biindchen, and Kate Moss.
Forstmann's high-profile deals made Emanuel want IMG more than ever. According to a June 2009 article in The New York Tunes, he had been "spending time" with Forstmann in Los Angeles "on the golf course and off," and speculation heated up again that somehow IMG and WME would be combined. But Emanuel still could not crack Forstmann. Explains Irving Azoff, a longtime media executive and former IMG board member, "When Ari started befriending Teddy, Teddy said, 'Maybe I should hire Ari and [his business partner] Patrick [Whitesell], I could give them each $500,000 and a few points of stock.' I don't think he ever saw Ari as the grand wizard."
In addition, Forstmann had little taste for Emanuel's specialty—representing talent—where fees are generated for negotiating television, movie, music, and book deals on behalf of clients. Forstmann supposedly told Emanuel, "You are in the barbershop business. The only way you grow your revenues is you get another barber to work for you, and he cuts 10 haircuts today."
One longtime associate of Forstmann's claims he would never have sold IMG to Emanuel: "He once told me the only good thing that Ari ever gave him was advice about his love life."
Why is George purple?
A side note: the original picture of George was a bit corporate, so I put a filter on it to give it some oomph on Twitter and Linkedin. The (very nice) PR at Bruin didn’t like the purpleness of it and demanded it get taken down. I don’t like taking things down, unless there’s a factual error or if I’ve made an obvious mistake or if I regret writing something when either over caffeinated, or wine drunk. This fell in to neither category, so we left it. The original picture of George is below, for those who prefer #NoFilter).
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